fLbizRuL KADI0 CQMMISSION
LIBRARY
73d Congression SENATE COMMITTEE PRINT
2d Sessi on
STUDY OF COMMUNICATIONS BY AN
INTERDEPARTMENTAL COMMITTEE
LETTER
FROM THE
PRESIDENT OF THE UNITED STATES
TO THE
CHAIRMAN OF THE
COMMITTEE. ON INTERSTATE COMMERCE
TRANSMITTING
A MEMORANDUM FROM THE SECRETARY OF COMMERCE
RELATIVE TO A STUDY OF COMMUNICATIONS BY
AN INTERDEPARTMENTAL COMMITTEE
Printed for the use of the Committee on Interstate Commerce
UNITED STATES
GOVERNMENT PRINTING OFFICE
35965 WASHINGTON: 1934
LETTER OF TRANSMITTAL
THE WHITE HOUSE,
Washington, January £3, 1934.
Hon. CLARENCE C. DXILL,
Chairman Interstate Commerce Comwittee of the Senate,
Washington, D.C.
MY DEAR SENATOR: Sometime ago I directed the Secretary of
Commerce to organize an interdepartmental committee to make a
study for me of the entire communication situation.
Such a committee was organized and has labored for several weeks
in covering this important field. The result of their study is found
in the report attached hereto. It is transmitted to you in the hope
that it may be of assistance to you and your associates on the com-
mittee in your further study of the subject and in the construction of
the needed legislation. I shall be glad to discuss this report with the
committee members at the proper time.
Very sincerely yours,
FRANKLIN D. ROOSEVELT.
(III)}
STUDY OF COMMUNICATIONS BY AN INTERDEPARTMENTAL
COMMITTEE
WASHINGTON, D.C., Januay-y 23, 1934.
To: The President.
From: The Secretary of Commerce.
A STUDY OF COMMUNICATIONS BY AN INTERDEPARTMENTAL COMMITTEE
There is submitted herewith the results of a study by an interde-
partmental committee which, at your request, I set up from various
departments of the Government. This committee was composed of:
Secretary of Commerce, chairman; Gen. C. McK. Saltzman, vice
chairman; Irving J. Carr, Chief Signal Officer of the United States
Army; J. H. Dellinger, Chief of Radio Section, Bureau of Stand-
ards; Capt. S. C. Hooper, Director of Naval Communications; Her-
bert L. Pettey, Secretary of the Federal Radio Commission; Irvin
Stewart, Department of State, and E. M. Webster, lieutenant com-
mander of the United States Coast Guard.
There were also associated with the committee, in an advisory
capacity: Hon. Clarence C. Dill, chairman of the Interstate Com-
merce Committee of the Senate; Hon. Sam Rayburn, chairman of
the Interstate and Foreign Commerce Committee of the House of
Representatives; and W. M. W. Splawn, special counsel to the
Committee on Interstate and Foreign Commerce.
The study, first, briefly outlines the types of electrical communi-
cation agencies ni the United States, and names the most important
corporations in control.
The commercial communication service can be conveniently con-
sidered in three classes: (a) Two-way telegraphy, (b) two-way
telephony, (c) broadcasting. The committee has considered the
status of commercial communication broadly and finds the problems
of the three classes to be very different. The studies made indicate
that notwithstanding these differences certain uniform conclusions
can be reached. Perhaps the major conclusion is the need of effec-
tive governmental regulation of the interstate and foreign aspects
of commercial communication. It is in the field of two-way teleg-
raphy that existing problems are most acute. The problems of (c),
broadcasting, are not considered in this study.
There are four major communication organizations in the United
States:
(a) The American Telephone & Telegraph Co. and its associated
companies with almost a monopoly in the domestic telephone service,
operating 13,793,000 telephones. These companies own an immense
wire system covering the United States primarily used for telephone
(1)
2purposes, but which includes surplus wires and circuits which can
be and are to some extent leased for other purposes including teleg-
raphy. This company operates (an international) radiotelephone
stations which communicate with radiotelephone stations in many
foreign countries and through these to nearly all foreign countries.
The telephone service of the American Telephone & Telegraph Co.
and its associated "Bell" Co.'s reach many localities not having
telegraph offices. It is a purely American company, although it
owns about 30 percent of the capital stock of the Bell Telephone Co.
of Canada.
(b) The Western Union Telegraph Co. engaged in telegraph and
cable communication service operating approximately 23,000 tele-
graph offices in this country. The Western Union also operates a
cable service to the West Indies, Europe, and in conjunction with
a British company to South America. It is primarily an American
company.
(c) The International Telephone & Telegraph Corporation op-
erating through subsidiaries a domestic telegraph service, a domestic
radio service, a marine radio service, a cable service to Europe, the
West Indies, South America, and the Orient, and a radio service
to the West Indies, South America, Europe, and the Orient. This
company also operates telephone services in foreign countries through
subsidiaries and extensive manufacturing companies in the United
States and abroad. This company has a number of subsidiary com-
panies, among which are:
(1) The Postal Telegraph Co. competing with the Western Union.
The Postal operates a comparatively small system of about 2,800
offices, located principally in the larger cities, which also are served
by the Western Union.
(2) Mackay Radio Telegraph Co., operating a rapidly expanding
domestic radiotelegraph company with 7 stations built or building,
a marine radio service with 8 stations on both coasts of the United
States, and 13 overseas radio circuits to Europe, the West Indies,
South America, and Asia.
(3) Commercial Pacific Cable Co., operating a cable from San
Francisco to Shanghai via Honolulu, Midway, Guam, and Manila.
(4) All America Cables with an extensive network from New York
to Central America, the West Indies, and South America.
(5) Commercial Cable Co., operating six trans-Atlantic cables
from New York.
(6) Thirty-one manufacturing companies in Norway, Belgium,
Shanghai, France, Argentina, England, Germany, Japan, Australia,
Denmark, Spain, Italy, Rumania, Czechoslovakia, Austria, Poland,
and two in the United States.
(7) Nineteen radiotelegraph and telephone companies in Brazil,
Argentina, Chile, Spain, Cuba, Peru, Mexico, Uruguay, Puerto Rico,
China, and Rumania.
It is primarily an international company, the principal owner-
ship and management of which is American. Its principal business
is in countries other than the United States, and it is on those for-
eign companies, officered and operated by foreigners, that it now must
look for support to combat the mounting deficits incurred in recent
years by its United States subsidiaries.
3(d) The Radio Corporation of America engaged in radiotelegraph
and radiotelephone communication service. Its principal communi-
cation subsidiaries are:
(1) RCA Communications, Inc., providing 40 circuits to the West
Indies, South America, Europe, Asia, and Africa.
(2) Radio Marine Corporation operating 12 marine radio service
stations, providing ship-shore and ship-ship traffic.
(3) National Broadcasting Co., operating a chain radio broadcast
system.
(4) Two manufacturing companies in the United States.
In addition to those four major organizations, there are a large
number of independent telephone companies, lines and associations,
operating over 4,000,000 telephones, but which handle a small per-
centage of the telephone service of the country.
There are several smaller radio companies engaged in telegraphy,
among which are:
(a) The Globe Wireless Co., a subsidiary of Robert Dollar Steam-
ship Co., providing service between the west coast of the United
States across the Pacific to Hawaii, Guam, and Asia, and to ships,
and between cities on the United States Pacific coast.
(b) The American Radio News Corporation engaged in the trans-
mission of press traffic with stations in New York, Chicago, Denver,
San Francisco, Atlanta, and Cuba.
(c) The Press Wireless Co. engaged in the transmission of press
traffic between stations in the United States, South America, Mexico,
Canada, Hawaii, and Denmark.
(d) The Tropical Radio Telegraph Co., a subsidiary of the United
Fruit Co., with a commercial service between certain points within
the United States and between certain points in the United States
and Central American countries.
(e) Other small domestic radio companies are:
(1) Central Radio Telegraph Co.
(2) Michigan Wireless Telegraph Co.
(3) Wabash Radio Corporation.
(4) Pere Marquette Radio Corporation.
(5) Western Radio Telegraph Co.
(f) The Government operates the following communication
systems:
Under the Commerce Department, a radiotelegraph system for the
airways division and marine beacons for the Lighthouse Service.
Under the Treasury Department, a system of radiotelegraph sta-
tions on both coasts of the United States for the Coast Guard for
communication with their ships and for purposes of safety of life
at sea.
Under the Department of the Interior, a radiotelegraph service
for the Forestry section (one of several small services).
Under the Navy Department, a radiotelegraph system of comnm-
nication between both coasts, between the naval districts. on both
coasts to ships at sea (including radio direction-finder stations),
and to Hawaii, Alaska, Manila, Panama, Puerto Rico, Guam. and
Samoa.
Under the War Department, a cable and radio service to Alaskf
a radio and wire telegraph network within the United States and
4Alaska, and a radiotelegraph service to its overseas units and trans-
ports.
(g) Several commercial aviation communication systems operat-
ing radiotelegraph and radiotelephone service between their landing
fields and between the landing fields and their planes.
This brief outline shows an interesting picture of a collection of
communication agencies not working in accordance with any national
plan. In the commercial field each company is a good one, but in
the telegraph field each lacks certain facilities to render the greatest
efficiency. The Radio Corporation, for example, is seriously handi-
capped through lack of system of offices throughout the country to
serve as feeders for its international radio service. Consequently,
it has a contract with the Western Union for pick-up and delivery
service, domestically. Both the Western Union and Postal operating
the domestic telegraph offices throughout the country own and oper-
ate cables to Europe. They naturally prefer to send messages orig-
inating in the interior via. their own cables in preference to turning
them over to the Radio Corporation for transmission by radio.
(However, should the Radio Corporation establish a system of do-
mestic offices and handle domestic service between United States
cities, it would make such inroads into the revenues of the Western
Union as to compel that company to close' the unproductive stations
in the small towns and villages now maintained out of the profits
of the Western Union made in the larger cities.) fOne member be-
lieves that the Radio Corporation of America or any other inde-
pendent radio company would hesitate to enter the domiestic field
against two such competitors as Western Union and Postal Tele-
graph-Cable Co. under present conditions. However, if Western
Union and Postal Telegraph should merge, he feels that it would be
necessary to permit a radiotelegraph company to enter the domestic
field in order to preserve for the public the benefits of the cheaper
rates and better service which competition engenders, in addition to
furnishing more direct international communication. There already
exists quite an extensive, though not unified, intercity radio service.
If these various radio companies were permitted to, and would
combine, this merger would furnish competition to a unified domes-
tic wire telegraph company which the other members seem.to favor.
The merged wire companies would have little to fear from a merger
of radiotelegraph companies for many years, but the public would
benefit by reduced rates, better and more direct service in the mean-
time. Research and development in the ultrashort wave field would
be required to develop pick-up and delivery service and this would
undoubtedly be reflected in the rapid advancement of all phases of
the radio art. In nations of great area such as Brazil, Russia, and
China, which could not afford landline structures like the more com-
pact nations, radio is already being applied to connect large cities
because of low costs of installation and operation, greatly to the
public advantage. After radio has been developed and its applica-
tion determined, consideration should be given to the advisability of
unifying it with wires and cables. Not now. And when it has
finally demonstrated its possibilities, the attitude toward it may have
changed considerably. Because of the wise provision of Congress,
at:he cable companies were not permitted to engage in radiotelegraphy
in the international field and rapid expansion of our international
radio service followed. The same protection should be afforded
radio in the domestic field.
The subsidiaiies of-tre International Telegraph & Telephone
Corporation with a domestic telegraph and international radio and
cable service across both the Atlantic and Pacific are handicapped
by having a relatively small number of domestic offices to feed their
international services.
The Western Union has a large number of domestic offices and a
trans-Atlantic cable service. It has no radio facilities whatever
and no cable facilities on the Pacific.
One member points out that in the foreign field, our numerous
United States communication companies are at a disadvantage in
their competition with foreign companies. The external communi-
cations of practically every large country in the world are either
private monopolies under Government control or are owned or op-
erated by the Government itself. Our numerous companies, com-
peting against each other and against foreign monopolies are played
off, one against the other, by the foreign monopolies, are forced into
positions whereby they are compelled, to save themselves, to make
contracts advantageous to the foreign monopolies and disadvanta-
geous to themselves.
Second. There are set out some arguments for and against Govern-
ment ownership of communication companies, stating the conclusion
of the committee that communication companies and their holding
companies, at least for the present, should be privately owned and
operated. In this connection, one member of the committee empha-
sizes that the law should be clarified to prevent control by foreigners
of holding companies investing in American communication com-
panies.
The contents of this section apply to communication companies
engaged in international communications as well as those in domes-
tic service.
Govenrnzent omnership.-The proponents of Government owner-
ship believe that such a national policy will result in-
1. Lower tolls due to (a) the elimination of the present com-
munication company profits and excessive overhead costs; (b) the
elimination of large " accounting " costs through the use of the post-
age stamp in prepaying telegrams; (c) the saving on interest charges
upon borrowed funds.
2. Better service by the consolidation of the telegraph and tele-
phone, both wire and radio services.
3. The prevention of discriminatory services.
4. The prevention of speculative management.
5. The extension of service to the localities not now served.
6. The ability to present a united front to foreign systems.
The opponents of Government ownership hold that such a national
policy is objectionable due to:
1. The danger of political domination and interference.
2. Government " red tape."
35965-34 2
63. The charge that the Government does not conduct its business
economically.
4. The conjecture that Government ownership would discourage
initiative, technical research, and advancement.
5. The belief that the communication service under Government
ownership in foreign countries is inferior to ours under private
ownership.
6. The belief that the people do not want Government ownership.
The committee believes that communication companies and their
holding companies should be privately owned and operated, at least
for the present. One member of the committee believes that this
conclusion is sound as far as it goes, but does not consider that it
is sufficiently explicit to be adopted as a policy by this country. For
instance, such a policy could permit foreign domination of all our
United States communication compalies, a condition which would
be unthinkable for reasons of commerce, foreign relations, and na-
tional defense. In 1927 when the Radio Act was made law, Con-
gress was alive to this possibility and went to great length in section
12 of that act to prevent foreign influence from entering our com-
munication system. They were unsuccessful. to some extent, as a
loophole in the law permits a foreign-dominated holding company
to own United States communication companies. This flaw in the
law has already been utilized for that very purpose, and the one
member strongly advises that now is the time to remedy the defect.
He is of the opinion that all the communication companies of the
United States and its possessions and their holding companies should
be privately owned by American stockholders,. operated and con-
trolled by American directors, officials, and personnel. To this end,
that member of the committee believes the provisions of section 12
of the Radio Act of 1927 should be amended and strengthened in
order that the intent of the provisions of this section may not be
evaded by setting up holding companies with foreign directors or
influenced by foreign stockholders, which holding companies now
may control United States communication companies under the pro-
vision of this section, although not so intended by the framers of the
law. He believes that the law should go still further and prohibit
any United States communication company from owning commercial
facilities in foreign countries, unless provided fo:: by treaty.
Third, under the heading " Regulation "', the committee recom-
men--ilhe transfer of existing diversified regulation of communica-
tions to a new or single regulatory body. to which would be
committed any further Federal control of two-way communication
and broadcasting.
Although the cable, telegraph, telephone, and radio are inextri-
cably intertwined in communication, the Federal regulation of these
agencies, in our country. is not centered in one governmental body.
The responsibility for regulation is scattered. This scattering of the
iregulatory power of the Government has not been in the interest
.of the most economical or efficient service. (In this connection, the
Ifollowing is quoted from the report of the standing committee on
cormmunications of the American Bar Association adopted at the
annual meeting Aug. 30-Sept. 1, 1932:)
In this connection it should be borne in mind that there is now no Govern-
:ment agency authorized to deal with communication problems as such. The
Interstate Commerce Commission has certain jurisdiction over the rates and
charges of both wire and wireless companies engaged as common carriers in
transmitting messages for hire in interstate and foreign commerce (49 U.S.
,C.A.L.). The executive branch of the Government has jurisdiction over the
granting of licenses for the landing of commercial cables (47 U.S.C.A., 34-19)
* * *. The Federal Radio Commission has authority to license and to regu-
late the operation but not the rates and charges of wireless communication
.agencies engaged in interstate and foreign commerce (47 U.S.C.A. 81-119).
That the communication problem is worthy of serious consideration by (Con-
gress and those in authority cannot be doubted. Division of authority over
.subject matter not readily susceptible of division has continued too long. Com-
munication problems are communication problems whether the agency employed
be telephone or telegraph, wire or wireless. All communication systems of any
magnitude own and operate or by arrangement use facilities of both types.
'The reasons are readily apparent. * * *
We submit that it is hardly consistent with economy or maximum efficiency
to have the regulation of wireless-communication agencies under one body and
,such relation of wire-communication aigencies as exists under another, while
the question of rates for such service, frequently involving both types of
facilities, are largely governed by the conditions of competition prevailing at a
particular time and place. The situation created thereby is not only contrary
to the public interest, but is contrary to the interests of the communication
companies themselves.
In addition to the regulatory powers over communication exer-
cised by different agencies of the Government mentioned above, the
committee also finds that certain rate-making powers are vested in
the Postmaster General by virtue of section 3, title 47, United States
Code.
The most far-reaching regulatory power over rates and practices
of telegraph, telephone, cable, and radio companies is vested in the
Interstate Commerce Commission. This important body already
burdened with its great responsibilities on railroad regulation has
never been very active in the regulation of communication agencies.
The activities of the Commission in connection with communication
were the subject of review in hearings held by the Senate Committee
*on Interstate Commerce in the second session of the Seventy-firsit
Congress, the Honorable Joseph B. Eastman appearing for the Com-
mission. The testimony showed that the Commission had no depart-
ments, bureaus, or divisions that dealt exclusively with radio, tele-
phone, telegraph, or cable matters (p. 1566), that few such cases had
ever been heard by the Commission, and that there were no employees
in any of the departments or bureaus who dealt exclusively with com-
munication matters, with the exception of one clerk and certain en-
gineers (p. 1575). The testimony indicated that the regulation of
communication agencies was a minor activity of the Commission.
Commissioner Eastman testified. "In my opinion-and I think this
opinion is shared by other members of the Commission--the tele-
phone, telegraph, and cable are more closely connected with radio
than with railroads. And while I have given no great amount of
study to the question, I am inclined to believe that the supervision
o(f communication companies by one commission would be preferable
to the present method of divided control."
The committee realizes that the communication traffic of the United
States exceeds that of any other country. It realizes that the coun-
8try's technical communication facilities are as good as those of any
other country (but it is of the opinion that they are not of the great-
est possible use to the people under the present conditions, particu-
larly as regards organization, extent, and rates).
One member particularly urges that these facilities have been de-
veloped through competition. He also believes that the continua-
tion of a policy of enforced limited competition in the wire and radio
telegraph field under the guidance of a policy regulatory body, whose-
duty it would be to determine the number and types of telegraph
companies competing in various areas, will continue to develop our0
telegraphic communication service and facilities to a greater extent
and at far less cost to the Government than would occur through
rigid regulation of rates and services.
The domestic telephone service of the country is mainly provided
by the American Telephone & Telegraph Co. and its associated com-
panies. The service rendered by this company is technically the
best in the world, but there are many complaints that it is too expen-
sive. Recently the company has introduced over its wires a rented
" teletype " service which the telegraph companies feel is an invasion
of the field of telegraphy. Both those conditions should be made
subject to the consideration and decision of the proposed regulatory
body.
The Bell System owns over 80,000,000 miles of wire (in cables
and open construction) which reach all sections of the United States.
The extension of the telegraph service to territory not now served
is, in general, impeded by the cost of such extension. The wires of
the telephone company now reach very many communities not pro-
vided with telegraph offices. Inasmuch as the telephone wires now
reach these small places and can by proper equipment be used for
telephony and telegraphy, simultaneously, without mutual inter-
ference, provisions can be made through proper regulation by which
the telegraph service can be extended through the use of these tele-
phone facilities to many of these communities not now served. How-
ever, one member believes that only through strenuous and costly
_Government efforts will the telegraph companies ever be compelled
to install telegraph offices and pay operators to operate stations in
towns where the volume of telegraphic communication is so small that
the office does not pay. He believes that' it is because of this lack
of business in the majority of small towns, rather than the expense
involved in competition in large cities which prevents extension of
telegraph service to those small towns. However, the regulatory
body could compel the telephone company to handle telegrams by
telephone to small towns at fair rates.
There is no existing communication policy.for the development of
improvement of our national communication facilities nor one single
offce in Washington to which all communication problems can be
referred.
The committee believes that the communication service so far
as congressional action is involved should be regulated by a single
body.
The committee believes that rigid regulation under a regulatory
body exclusively devoted-to that duty:
91. Will reduce rates by regulating profits and overhead expenses
and intercompany charges.
2. Will prevent discrimination.
3. Will control exclusive contracts which are made by communica-
tion companies with hotels, railroads, and foreign countries.
4. Will regulate annual depreciation charges.
5. Will prevent speculative management.
6. Will prevent the " watering " stocks.
7. Will permit the extension of service in localities and homes
not now served.
One member observes: The committee has been given no oppor-
tunity as yet to make a study of the telephone situation in the
United States, except for the meager data contained in the report.
There is a feeling, however, that the cost of renting telephones is too
expensive and the other members propose to remedy this by clothing
the proposed Federal regulatory body with power to regulate serv-
ices and rates. He feels that perhaps the overhead expense claimed
by the telephone companies, on which rests one of the main bases for
their rate structures, and which must be paid for by the telephone
subscriber, may be too great. The absence of competition (which,
nevertheless, is undesirable on a grand scale in this field for reasons
he has already indicated) is probably the major cause of such high
rates. However,-he claims no knowledge on which to base any asser-
tion that a Federal rate control body can remedy this situation.
In fact, he is inclined to believe that such rate control by a Federal
regulatory body would be almost impossible without enormous ex-
pense to the Government and unprecedented invasion of the principal
of State rights.
Almost the entire expense of the telephone companies is incidental
to local service and plant charges. State and municipal regulatory
commissions have authority to regulate local charges based on these
expenses. The Interstate Commerce Act prohibits the Ipterstate
Commerce Commission from regulating intrastate rates. As only
about 11/2 percent of the telephone traffic is on long-dista e business,
comparatively little revenue is received by the telephone companies
for long-distance interstate or foreign calls and this type of service
does not appear to be unduly expensive even now. For the Federal
rate-regulating body to attempt to regulate interstate rates would
necessitate investigation by this body into the cost of services, plant
structure, and financial condition of the telephone companies in
every city in the Union.
This would entail considerable expense in order to obtain the
questionable result of reducing rates on the comparatively few inter-
state communications handled by the telephone companies. On the
other hand, if the Federal rate-control body is to actually function
to reduce rates on the huge volume of intrastate traffic (which com-
prises about 981/4 percent of the total telephone traffic, the rates on
which are practically the only ones affecting the public to any great
extent), the one member can visualize no other way for this body to
act efficiently than by appointing commissions in every city and
large town in the United States, replacing all State and municipal
commissions, in order to investigate costs, services, and conditions
10
there. Rates could never be regulated from Washington without
such assistance. Such a procedure would appear to be an extrava-
gant waste of Government funds unless we are sure it will result
in benefit to the public. He does believe that machinery should be
set up for the suggested Federal regulatory body, whereby if one or'
more State commissions complain of excessive interstate rates
charged by the telephone monopoly, the regulatory body could com-
1k1 hearing of all parties and render decisions as to what telephone
AIEtes were just. While it is true that the Interstate Commerce Com-
IlMission does regulate rates within States to a certain extent, the
Regulation of telephone rates within States and cities would be a
vastly more difficult proposition due to the many local and internal
municipal problems encountered by communication companies, which
have no bearing on railroad problems. Lacking further opportunity
for study, he believes that rigid regulation of rates by a Federal
regulatory body would be impossible unless accomplished at prohibi-
tive expense. He believes that limited competition will accomplish
the desired results in the telegraph field and that a Federal regula-
tory body empowered to have complaints of State commissions and
render decisions as to rates of telephone companies will accomplish
them in the two-way voice communication field.
From the legal, engineering, and public service standpoints it
appears that the Governments' regulation of private communications
should be administered either by a communications commission of
a quasi-judicial character, or placed directly under the jurisdiction
of a Cabinet officer. In the event of the latter, there should be
established a board of communication appeals whose function would
be limited to issues involving equity. In either event, whether the
regulatory administration is placed directly under a Cabinet officer
or under a communications commission. all interested parties should
have recourse to a Federal court in the District of Columbia for the
purpose of appealing adverse decisions.
Inasmuch as there is a very close relationship. insofar as avail-
ability of(acilities is concerned, between the departments of the
Government operating their communication systems, such as the
Army, Navy, Coast Guard and the Airways Division, and the organ-
izations, both domestic and international, which operate public serv-
ice communication systems, it would seem advisable to establish
a national communication advisory council consisting of representa-
tives, appointed by the President from the various interested Gov-
ernment departments, including the Department of State. This
National Advisory Council, together with the civil body responsible
for the administration of civil communications, would be charged
primarily with the formulatioin of policies. Where these policies in-
volved, either directly or indirectly, the interests of nongovernment
communication organizations holding license under the Government,
or directly involved the interest of the public, the civil communica-
tions administration and the advisory council should be constituted
as a communications committee of the whole to hold public hearings
at which any person who could qualify as an interested party would
be permitted to appear and give evidence as well as arguments.
Fourth. Under the heading of " me r ers ", it is stated that existing
law permits two or more telephone companies to consolidate with the
13
taity to compete with wire and cable in both the international and
d"mestic telegraph fields."
F fth. Under the heading of "' rates ", members of the committee,
with one exception, say the subject of rates is one properly for con-
sideration and control by the recommended regulatory body. One
member makes an extended argument for the priciple of limited coin-
petition.
*(The subject of rates is one properly for consideration and control
by the recommended regulatory body.)
One member is not in agreement with this statement for the rea-
sons put forth in his discussion of " Regulations." If the principle
of limited competition is adopted, as he recommends, in the field of
telegraphy, this principle will provide an automatic rate regulation
in itself and he foresees little need of the regulatory body concerning
itself with the rates of telegraph companies. Lacking detailed data
colcerning the rates of the telephone company, he is unable at pres-
ent to see how rate regulation of their services can be accomplished
to any appreciable extent by a government regulatory body without
prohibitive expenditures, except in the manner which he has indi-
cated in his discussion under " Regulation ", suggesting certain im-
provements to be made in the existing Federal Government ma-
chinery for administering communications.
In view of the foregoing, one member recommends that the fol-
lowing points be adopted in the institution of a national communi-
cations policy for the United States Government:
(1) In the interest of service to the public, fair rates, develop-
ment of the art otelecommunications and governmental economy,
the policy of the Government should be to require and, at the same
time, limit competition in the telegraph communication field between
that number of companies which can operate at a reasonable profit.
(2) No policy, such as permitting the merger of radio and cable
or wire companies, should be adopted, which would tend to retard
the development or expansion of any phase of the art of telecom-
munications, either in the domestic or international field. Positive
action should be taken to insure the rapid development and appli-
cation of radiotelegraphy.
(3) The communication companies of our country, including
holding companies, should be privately owned by American stock-
holders, operated and controlled by American directors, officials, and
personnel.
(4) Encouragement should be given to American-owned com-
muhication enterprise in foreign countries which is independent of
radio companies licensed to own or/and operate radio facilities
within the United States and its possessions; on the other hand the
merger of foreign-controlled, or partly foreign-controlled, commu-
nication services or facilities with those of American communica-
ion companies, including holding companies, should be prohibited.(5) Provision should be made for the permanent assignment of
such radio frequencies and other communication facilities as are
required for national defense and other authorized Government
agencies and any policy upon which the Government decides should
fully meet the requirements of national defense.
14
There stand out in the study the following:
(1) Continuation of private ownership and operation of cork-
mumications;
(2) Government regulation of such ownership and operation by
one agency, whether an independent commission or a bureau in an
executive department;
(3) Some further extension of permission to merge existing com-
panies under the supervision of a regulatory body; and
(4) A disagreement as to the extent of the elimination of com-
petition.