TELECOMMUNICATIONS - A PROGRAM FOR PROGRESS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84-00499R000700100001-8
• Release Decision: RIFPUB
• Original Classification: R
• Document Page Count: 330
• Document Creation Date: December 12, 2016
• Document Release Date: November 16, 2001
• Sequence Number: 1
• Publication Date: February 1, 1951
• Content Type: REPORT

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0100001-8
? TELECOMMUNICATIONS
-
A PROGRAM FOR PROGRESS
NSC Declassification/Release Instructions on File
A Report by the
President's Communications Policy Board
February 1951
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TELECOMMUNICATIONS?A, PROGRAM FOR FROGRBS$
A Report by the
President's Communications Policy Board
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LETTER OF TRANSMITTAL
Dear Mr. President:
February 161 1951
We have the honor to transmit the report on policies
and practices recommended to be followed by the Federal
Government in the communications field, which was called for
by Executive Order 10110 of February 17, 19500 establishing
the Presidents Communications Policy Board.
During the year since our appointment, we have
examined many phases of the problems of national telecommuni-
cations policy and practice. We have consulted the best-
qualified Government and private sources. A small professional
staff has studied special phases of the field. The major
results of these consultations and special studies are embodied
in our report.
The Board is in unanimous agreement on the conclusions
expressed.
Respectfully submitted
Lee A. DuBridge
William L. Everitt
James R. Killian Jr.
David H. OtBrien
"Irvin Stewart* Chairman
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INTRODUCTION
THE PROBLEM POSED
Pressing problems in the operation of the nation's wire and
radio communications facilities led to the creation of the
President's Communications Policy Board on February 17, 1950.
In his letter of that date to our Chairman, the President
declared that there is "a major public interest in assuring the
adequacy and efficiency" of this "vital resource." He noted the
close relationships of the telecommunications services--radio, tele-
phone, and telegraph--and the influence of governmental operations
on the system, The President therefore asked for a comprehensive
, inquiry that would view the specific problems as parts of the
"broader problem of developing a total national communications
policy." The text of the President's letter follows:
.
My' dear Dr. Stewart:
"Communications services represent a vital resource in
our modern society. They make possible the smooth functioning
of our complex economy. They can assist in promoting inter-
national understanding and good will; they constitute an im-
portant requirement for our national security. There is,
accordingly, a major public interest in assuring the adequacy
and efficiency of these services.
"Developments in this field during and since the war have
created a number of problems which require careful consider-
ation at this time. The extent to which the Government should,
In time of peace, continue to operate its own communications
facilities is one such problem of current importance. The
question of merging the overseas operations of our commercial
communications companies also requires objective review. The
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most pressing communications problem at this particular time,
however, is the scarcity of radio frequencies in relation to the
steadily growing demand. Increasing difficulty is being experi-
enced in meeting the demand for frequencies domestically, and
even greater difficulty is encountered internationally in
attempting to agree upon the allocation of available frequencies
among the nations of the world. In the face of this growing
shortage, the problem of assuring an equitable distribution of
the available supply of frequencies among all claimants, both
governmental and private, is rapidly assuming major prominence.
"Problems such as these cannot adequately be considered on
a piecemeal basis. They must be viewed as parts of the broader
problem of developing a total national communications policy,
designed to assure the most effective utilization of the various
forms of communication facilities, and the full satisfaction of---
those needs which are most essential to the broad public
interest. An over-all, objective review of this entire situa-
tion is urgently needed.
"I am therefore establishing by Executive Order a temporary
Communications Policy'Board of 5 members to study and to make
recommendations to me on the policies and practices which
should be followed by the Federal Government in this field in "
order best to meet the broad requirements of this Board. In
view of the need for early action in this field, I should like
to receive the Board's final report by no later than October
31, 1950.
"The Executive Order establishing this Board states that the
Board shall study the present and potential use of radio and
wire communications facilities by governmental and non-govern-
mental agencies. The Order further states that the Board shall
make recommendations in the national interest concerning (a)
pelicies for the most effective use of radio frequencies by
governmental and non-governmental users and alternative admini-
strative arrangements in the Federal Government for the sound
effectuation of such policies, -(b) policies with respect to inter-
national radio and wire communications, (c) the relationship of
government communications to non-government communications, and
(d) such related policy matters as the Board may determine.
"I feel that the problem of radio frequencies will be one
of the most important areas for the Boardts investigations. I
hope that, as a result of its studios, the Board will be able
to recommend possible means for conserving frequencies, as well
k as standards for determining the relative priority of competing
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claims for frequencies, and possible administrative arrange-,
merits within the Government for assuring, on a continuing
basis, a sound and equitable allocation of the limited fre-
quency supply.
"I believe that the studies to be undertaken by the
Board are of vital importance to the economy of this Nation,
to our international relations, and to our national security.
I am sure that you will receive the full cooperation and
assistance of all parties concerned.
e4W
Sincerely yours,
HARRY S. TRUMAN"
The Executive Order referred to in the Presidentta letter reads
as:followst
."EXECUTIVE ORDER # 10110
??? -IMO 411.?
"PRESIDENT'S COMMUNICATIONS POLICY BOARD
"By Virtue of the authority vested in me as President,4 the,
United States, it is hereby ordered as follows; ,
"1. There is hereby created a board to be known as the
Prosidentls Communications Policy Board which shall be. composed
of a chairman and four other members to be designated by the
President.
"2, It shall be the function of the Board to study the
present and potential use of radio and wire communications
facilities by governmental and non-governmental agencies and to
make and present to the President evaluations and recommendations
in the national interest concerning (a) policies for the most
effective use of radio frequencies by governmental and non-
governmental users and alternative administrative arrangements
in the Federal Government for the sound effectuation of such
policies, (b) policies with respect to international radio and
wire communications, (c) the relationship of government com-
munications to non-government comMunications, and, (d) Tauoh
related policy matters as the Board may determine,
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"3. The Board is authorized to hear and consult with
representatives of industry and the Federal Government con-
cerned with the subjects under study by the Board. All
executive departments and agencies of the Federal Government
are authorized and directed to cooperate with the Board in
its work and to furnish the Board such information as it
may require in the performance of its duties. The Board
shall protect the security of any classified information
submitted to it.
1'4. Each member of the Board shall, while away from his
'tem or regular place of business and engaged in the official
business of the Board, receive actual traveling expenses and
per diem allowances in lieu of subsistence in accordance
with rates established by the Standardized Government Travel
Regulations, as amended.
e.
During the fiscal year 1950 the expenditures of
the Board and the traveling expenses and per diem allowances
of the members thereof shall be paid out of an allotment -
made by the President from the appropriation appearing under
the heading "Emergency Fund for the President" in the Inde-
pendent Offices Appropriation Act, 1950 (Public Law 266,
approved August 24, 1949); and during the fiscal year 1951
the same shall be similarly paid from any corresponding or
like appropriation made available for the fiscal year 1951.
Such payments shall be made without regard to the provisions
of (a) section 3681 of the Revised Statutes (31 U.S.G. 672),
(b) section 9 of the act of March 4, 1909,35 Stat. 1027
(31 U.S.C. 673), and (0) such other laws as the President
may hereafter specify.
"The Board shall terminate one year after the date of
this order.
THE WHITE HOUSE,
February 17, 1950".
HARRY S. TRUMAN
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impulses speeding through these facilities convey intelligence of
- all sorts throughout the country and to other nations of the world.
When wires and cables are used as the sole media through which
they are transmitted, it is not difficult to control these impulses.
Whon the transfer of electrical energy is made by radio through the
medium popularly 'called the "ether," serious problems arise.
Many ofthese problems stem from the fact that the other is public
property available to all the people of the world, and the further fact
that there is a limit to the number of electromagnetic waves which can
travel through it without interfering with one another.
If interference is to be avoided, it is obvious that both national
and international users of the radio spectrum must reach accord on
equitable sharing of this limited medium. Consequently, tolocommuni-
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cations must be considered both from a national and from an inter-
national point of view.
The telecommunications system of the United States is engaged
basically in the transfer of-information from one perSon to another.
Yet information about the system is inadequate.. As part of our
studies, we have gathered facts that fill some of the important gaps.
The recognition that there areother gaps and that they too must be
filled underlies several of the recommendations of policy and action
which we shall make.
In-Cur-quest for solutions to the problems of telecommunications',
wesurveyed the facilities availablo'todayjand the difficulties
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encountered in their operation, reviewed the troubles that have caused
growing pains in the development of the system, and sought symptoms
of future ills.
----Both private-and public agencies operate in the telecommunications'
system. We have found inescapable evidence of serious difficulty,
not confined to the United States alone, but international in scope,
In the management and use of the worldwide but limited resource of
the radio frequency spectrum. There is indication of economic danger
for some private companies, and of a lack of help on the part of
Government agencies in avoiding that danger. There is evidence of
.confusion of responsibility among Government agencies which from time
to time have been established for the regulation of parts of the
system. These are principal among the disconcerting facts which our
studies?have disclosed.
Not all-the facts are disconcerting, however. We have also found
reason for no 'small amount of encouragement. There are many--and they
are among the largest--areas of the telecommunications system, both
. public and private, in which standards of efficiency, economy, and per?
formance are superb. There is a,spirit of cooperation among the com?
ponent organizations--public and private.. There is in existence an
administrative structure which, if properly strengthened, can become
?
61 effective central instrument to foster a vigorous telecommunications
system.
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Special Problems of Telecommunications
Telecommunications present a special combination of technological,
economic, social, and political problems. The telecommunications
system as a whole, public and private, depends to an unusual degree
upon a technology which is changing and growing with marked rapidity.
The task of adjusting organization and practice to take advantage
of these technological advances and opportunities is complicated,
however, by the intimate connection of telecommunications with both
the national security and the international relations of the United
States. Political considerations-may require commercial carriers to
maintain Unprofitable circuits to certain overseas points. Economic.
prospects may counsel against heavy investment in the latest and most
.,expensive high-speed cable equipment, yet the requirements of national
? defense may justify such an outlay.
The radio sector of our telecommunications system is further
complicated by the fact that radio operates in the public domain.
The possibility of interference necessitates domestic and international
efforts to arrive at agreements for the apportionment of radio fre-
quencie.s. Here again, efforts to take full advantage of new develop-
ments must proceed in the short run within the limits of existing
agreements, and may be hampered or helped in the long run by the results
A
tf efforts to negotiate new ones.
Special economic pressures have borne heavily on some of the
ations telecommunications companies* 'Air mail and long-distance
MEM=
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telephone service have reduced the potential demand for telegraphic
services. American companies engaged in overseas operations have
been competing with each other for markets and in dealing with
foreign monopolies. In this latter case, American companies have
met with a special obstacle: The competition among American firms
offers foreign monopolies the opportunity to play American competitors
off against each other. The Federal Government's own international
telecommunications network, which has grown to vast proportions in
recent years, has handled traffic which might have been sent over
common carriers.
The merging of private companies engaged in international radio
and cable communications has at times been advocated as a way of
easing their position. In the domestic field, merger of the telegraph
companies has already occurred. It has been further advocated that
-the merged company acquire the record communications business of the
telephone company--its teletypewriter exchange and leased line
services.
Continued operation of the privately owned companies is essential
to the national security, but nowhere do we find provision within the
Government to insure that Government policies do not inadvertently
affect the economic well-being of these companies.
We have found that Federal Government has encountered many
difficulties in its efforts to keep up with the growth and increasing
cbmplications of the nation's telecommunications structure. Some of
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these difficulties are suggested in the chapters on domestic and
international telecommunications.
Technological progress in telecommunications is so rapid that it
could quickly alter the character of the entire structure. This
fact requires special vigilance on the part of the regulatory agencies.
Specific Issues
For analysis, we resolve these general problems into five specific
issues. They aro:
1. How shall the United States formulate policies and plans for
guidance in reconciling the conflicting interests and needs of Govern-
ment and private users of the spectrum space?that is, for guidance in
making the best use of its share of the total spectrum?
2. How shall the United States meet the recurrent problem of
managing its total telecommunications resources to meet the changing
demands of national security?
3, How shall the United States develop a national policy and
position for dealing with other nations in seeking international tele-
communications agreements?
4. tow shall the United States develop policies and plans to
foster the soundness and vigor of its telecommunications industry in
tho face of new technical developments, changing needs, and economic
aevelopments?
5, How shall the United States Government strengthen its organi-
' zation to cope with the four issues stated above?
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The first four of those questions require brief explanation;
1, Redenciling Uses of tho Spectrum; This task--which is known
as frequency management--is one of ehorthoUs technical complexity. Dif-
ferent portions of the spectrum have radically different propagation
characteristics; that is, their range and dependability, vary. Somo
are usable for long-distance and others only for short-haul purposes.
Their efficiency also changes from tight to day, and from day to day,
and is affected by sun spots and by atmospheric conditions.
By better management of the spectrum, much more could be done
with frequencies now available.. There id opportunity for more effective
sharing of frequencies, for more intensive use of individual frequencies.,
and increased economy in kilocycles assigned to each circuit,
The assignment of space in the spectrum among private users i
, eluding state and local but not Federal Government agencies) is a
responsibility of the Federal.Communications Commission (FCC). The
total amount of such space available for assignment, however, is not
determined by the FCC. In effect, it is determined by the President,
who is responsible for the assignment and management of those fre-
quencies used by Vederal Government agencies. The Interdepartmont
Radio Advisory Committee (IRAQ) is the instrumentality through which
frequencies are assigned to Federal users. Thus far, no national
policy has existed to clarify this dual control of a single resource
and thus -to aid in governing the apportionment of space between private
uabrs and Government users as groups, No 04,..teri4-have been established
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? for use in choosing between the conflicting needs Of a Government and
a non-Government user.
2. actional Security: In the present period of recurrent crisis,
it is likely that we shall be faced with a continuing problem of ad-
justing the use of telecommunications?especially radio'frequencies?
te, what may be violent fluctuations in the requirements for national
security. Indeed; we may face a situation in which the Fresidentis
emergency powers to control, take over, or close down communications
facilities will have to be invoked, and arrangements for the delegation.
and exercise of those powers will be essential, We may also 'be faced
with the necessity of creating wholly new telecommunications facilities._
Telecommunications of course play a major role in the economic and -
cultural life' of the nation. They are the vital nerve system of
our modern military establishment. When spectrum space is insufficient
to meet both the full needs of national security and the till:needs of
other affairs, the latter must give way to the former. When the emer-
gency has passed, frequencies and 'facilities must be restored to
civilian use. To create an ad hoc agency to meet each crisis Would
be a clumsy expedient at best, and indeed, the problems of transfer .
and retransfer of spectrum space and of facilities for using it are
too complex for ad hoc control to be adequate. A continuing mechanism
to deal with this situation is needed for the foreseeable future,
3. .International Aammta. Just as the Vnited States has no
? clear policy for apportioning its own sharp of spectrum space SO it
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has lacked satisfactory means of determining policy as a basis for nego.
tiations with ether nations. The United States, in preparing positions
for international negotiations, has in effect asked Federal and other
claimants to state their needs, and then presented the total as the
United States requirement. In those portions of the spectrum where
the total of these requirements has been small enough to be accommo-
dated along with the needs of the rest of the World, our delegations
to conferences have had a negotiable position. In some cases, however,
the total stated requirements have exceeded not merely those which
mak
could reasonably be put forward as the proper United-States 'ehare, but
have actually exceeded the total, physical content of the bands. Further-
more, there is no permanent mechanism by which the stated requirements
of United States uSers can be adjusted with equity and safety. The
imperative need for means of making such adjustments hardly requires
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elaboration.
4. ,Maintainirg a_LuILIndusta. The private telecommunications
'industry Of the United States is one of the nation's most valuable
assets in peace or in war. The normal life of the country is supported
and facilitated by it in numberless ways. In abnormal times, the in-
dustry can place at the disposal of the nation its large reserve
capacity, built up because of its competitive structure. This capacity
helps to take up the immediate surge of military'requirements.' The
industry can release radio frequencies, cable capacity, and other com-
munications facilities, when required for Government purposes, without
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seriously affecting its ability to carry the civilian load.
It is essential that the industry be in sound economic condition.
Some of its components, however, have faced serious difficulties. To
meet these situations, the companies have from time to time taken
Individual action, and from time to time Government has been of assis-
tance to them in rate adjustments and other ways.
But there has been no long-range study of the question, no long-
range planning. No agency of Government is in a position to take a
comprehensive view of this problem. No agency is qualified to advise
the President in fields-whore the interests of private and Government
telecommunications users aro in conflict. Meanwhile, in the absence
of guiding policy, the action of Government agencies could seriously
handicap the industry.
22s2m.sithe Study
We have spent nearly a year seeking answers to these Mar problems
and also to the crucial question Number 5--How shall the U. S. Govern-
ment strengthen its organization to cope with these four issues?"
In this study we found it necessary to collect a large volume of infor-
mation--some of which was not readily available in public documents.
We were fortunate in securing the services of an extremely competent
staff and we received most cordial cooperation from all Government and
,t1rivate agencies whom we consulted. .Many agencies went to great leniths
to Supply detailed data on various phases of' the problem.
The most pertinent information which We collected is summarized in
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the succeeding chapters of this report, and we have given particular
attention to those subjects not adequately covered in existing' litera-
ture. And yet there are many important phases of the subject which
we have covered only too lightly, in some cases because there already
exists available public information, but in other cases because we
did not have time to carry out the extensive research necessary for
an adequate treatment. In fact, as our study progressed, we became
more and more aware of the great complexity of the problem and of
the fact that no temporary or part-time board could do justice to the
entire problem.
Critical to this study was an investigation of the nature and
extent of the actual pressure for additional space in the radio fre-
quency spectrum. The picture of the situation presented in Chapter II
is one of great complexity.- In many bands there is. extreme congestion..
The competition for frequencies for radio broadcasting and for tele.-
'vision is well known to all. Less well known but also critical is the
situation in the band suitable for very long range communication--4 to
27.5 megacycles. In this band not only is there great need for many
circuits, but, because of propagation characteristics, two stations
thousanda'of miles apart may still interfere with each other if they
operate on the same or adjacent frequencies.- The problem immediately
'Oecomes-one.for complex international. negotiations.
The degree of spectrum crowding.varies enormously in different
parts- of the spectrum and in different parts of. the 'world. And opinions
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vary as to how serious the situation now is. But no one denies that
it is getting worse and will continuo to do so. Only vigilant in-
telligent management and vigorous pursuit of new technological possi-
bilities can prevent possible future chaos.
In Chapter III we turn attention to an analySis of the U. S. domest
? wire and radio telecommunication facilities, tracing their technological
.6a4
?
development and the economic problems they face. These facilities are
very largely privately owned--though the U. S. Government is a most
substantial customer. But the great bulk of the facilities available
for public message service--telephone and telegraph--are owned by two
great regulated butcompeting monopolies--the American Telephone and
Telegraph Company and the Western Union Telegraph Company. These two
companies perform an invaluable public service, and it is important
for the Government to make sure they are intelligently regulated so
that the public and the Government may continue to receive the benefits
of the irreplaceable serice they supply.
We believe that this service can best be insured by retaining
the present system of private ownership.
The field of international telecommunication (Chapter IV) offers
far more puzzling problems, Thus, while the United States end of
overseas radio telephone service is in the hands of a single company
(the Bell System), radio and cable telegraph services are offered by
several competing companies. Fluctuating international political and
ecolnomic conditions the rapidly growing use by the U. S. -Government of
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international communication facilities (many of- which are Government
owned), competition for space in the crowded long-range radio communi-
cation spectrum, and many other factors have led to serious problems
whose nature and extent are only too inadequately outlined in this
report. But they demand urgent attention by the U. S. Government,
and we have recommended policies and mechanisms to help solve these
continuing problems.
The nature and functions of the various existing Government
agencies concerned with telecommunications have been given detailed
examination (Chapter V). We find a complex pattern of such agencies
with even more complex interrelations. It is a structure which has
functioned smoothly in many ways. But it involves a duality or even
multiplicity of control, overlapping interests, and is a structure
inadequate to meet the ever more complex Problems of this field. We
believe the structure can be rendered coherent by the creation of a
new executive agency and we-sof forth in-somedetail_oUrIToposals
:for the creation of this agency.
Finally in Chapter VI, we set forth existing and proposedtelecom-
munications policies in the hope that they may serve as a Starting
.Pointfor: the development of policies to guide present and future
Lagencies, public or private, which deal with telecommunications.
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Oone.lusions
On the basis of our studies, we have reached the following
conclusions.
A. As to the pressures on the radio spectrum:
1. Pressure on the radio frequency spectrum is steadily increac-ie,
as a result of the greater use of radio in telecommunications.
2. The means on which we-have relied in_the_past_for management
of the spectrum are no longer adequate to resolve in the best national
interest the problems produced by- this increasing pressure. The
current difficulty growing, out of the search for suitable space for
television broadcasting in itself emphasizes this inadequacy.
3. Measured in terms of spectrum space rather than in number
of discrete frequency channels, the Federal Government's share of the
spectrum, though not so great assis commonly believed, is nevertheless
'largo.- While we do not know that it is out of proportion to the
Government's responsibilities, it must have the most adequate Justin-
cation .and careful management if the greatest,benefit'is to be obtained
from it.
4. There is need for a continuing determination of the changing
requirements of Federal Government users both among themselveaand in
relation to the. requirements of other users.
5. .111e r,ecent rapid worldwide growth of telecommunications com-
bined with the needs of the current national emegency, makes the .
resolution of these problems a matter of great urgency.
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6. Tho resolution of those problems can-be-secured only through
adequate, energetic management, which demands that the Government
'organize itself to take a comprehensive view of the telecommunications
field.
As to United States telecommunications at hornet
1. The telephone system of the United States is a financially
sound, multi-billion dollar industry consisting of the Bell System and
5,000 independent companies. This coordinated system is providing the
nation with what is admittedly the best telephone service in the world.
It is steadily improving that service by aggressive technological
advancement. Inyiew of the healthy condition of the telephone system,
we conclude that no changes in Government procedure for insuring ade-
quate service in the national interest are necessary.
2. The telegraph system of the United States has experienced
economic difficulties owed in part to the expansien of other means of
rapid communication. The recent return of the principal telegraph
company to profitable operation, in part becauso. of improved managemem
and modernization of its plant and in part because of greater general
business activity, is encouraging. This current improvement in the
position of the industry 'affords an opportunity to develop information
Aeeded for sound, long-range planning to avoid future difficulties.
We believe that sound management and vigorous technological development
cAn contribute further to the stability of the domestic telegraph 'system
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3. .The effects of.. theadministration of the Communications Act
,of 1934 relative to reductions of telegraph service through the--
closing of unprofitable offices or through substitution of agencies
need further study, Western Union maintains that the restrictive
application of present legal provisionsplaces an undue financial
burden upon the company which it can ill afford. 'to bear; representa-
.-tive,eof labor contend that too great a degradation of service often
has followed the substitution of agencies for offices.
4. Rates for the telegraphic services--telegram, TWX, and private
leased lines--are given regulatory approval without adequate knowledge
of the Costs of providing suchservices, Also, in passing upon long..
1
distance telephone rates, the Federal CommunicationsCommission should
, inform itself of the probab3.e effect of proposed changes upon the
.position of the telegraph industry, and upon ratee for_local.telephone_
service.
5. We have looked carefully into the proposal that our telecom-
munications industry should be dividedclearly into two paks, one
-dealing exclubively with "record" communications the other -With com-
munications by "voice." Our examination of this question has shown
that such ,a dividing line is very difficult to draw, and we have con-
cluded that the attempt to reorganize our telecommunications system on
tie basis of.such a distinction might result in-effects on the system
.going far beyond the initial intention of any such division.- The main
-
bore of contention tod4 is the fact that the telephone 'company offers
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a form of record communications--TWX and private-line leases--which
competes with message-delivery functions of the telegraph company.
We note that Congress in 1943 amended the Communications Act to permit
acquisition of this form of service by the telegraph carrier. Thus
the companies involved are free to negotiate an agreement to make
this change, subject to approval by the FCC. We believe that this
matter should be,determined by the normal-processes of negotiation.
64 The operation of leased domestic telecommunications networks
by the Federal Government for the transmission of Federal Government
messages is not, strictly speaking, competitive'With theoperations
of commercial telecommunications companies. In its teletype networks,
the Government is taking advantage of volume rates offered by the tele-
communications companies in the same manner as can any other customer -
with large volume requirements. Tho Government should continue to take
.full advantage of the most efficient and economical rates and conditions- -
of service which are available to any large User. While it is important
that the Government seek .the most economical means of handling its own
communications., it,also-is of great importance that it continue its
present policy of using privately owned facilities rather than building
up a Government-owned competing network..
-As to United States telecommunications abroad:
1. The Government should adopt the policy of maintaining the
strength of the private competitive international communications system.
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2. There should be a Government agency charged with the responsi-
bility for implementing this policy.
. 3. Urgent recommendations have been made to Congress that legis-
lation be enacted to permit companies in the international cable and
radio field to merge. One of these calls for a single company to
handle all United Staten domestic and international record communicatio.
.ii .providing an integrated system. We, find no imperative reasons
calling for an immediate merger of these companies; we conclude, on the
contrary, that recent improvements encourage a continuation of their
present independent status, Moreover, in our judgment, a period of
partial mobilization is not a good time to undertake a reorganization
of these important components of our communications system. Our conclu-
sions in regard to merger are based on conditions as we now find them
and can project them. We recognize, however, that the situation can
change and that the welfare of our communications system demands constant
attention to the condition and stability of these companies. We are
mindful of the strong conviction held by informed members of Congress
and others that merger is desirable. We have ascertained that interested
Government departments are divided in their views on the subject. While
we believe that the national interest does net at this time require the
repeal of existing prohibitions against merger, we recognize that changii,
6onditions may provide compelling reasons for a merger later on. If so,
their anticipation by adequate study and legislation will be essential.
The kind of merger which might thus be indicated as well as the timing
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of it, may be dictated not only by normal economic forces, but by
the wisdom of the Government's own policies vis-a-vis the tompanies
and by technological developments. Technological developments may in
fact prove to be the conclusive factor in determining the future of
these companies.
D. As to Government organization:
1. Fundamental changes in telecommunications require the overhaul
of Government machinery for formulating telecommunications policy and
. for administering certain telecommunications activities in the national
interest.
2. Tho Communications Act of 1934 established a system of dual
control of the radio frequency spectrum. This dual control arises
largely from the fact that the regulation of private telecommunications
is a-function of Congress exercised through the FCC, while the operation
of Government telecommunications is primarily a function of the Executive.
For example, the assignment of frequencies to military services is an
.exercise of the President's powers as Commander-in-Chief of the Armed
? Forces.
3. The Federal Communications Commission, though needing further
strengthening, should continue as the agency for regulation and control
ot private users.
,4, The President has exercised his power to assign frequencies
thtough the Interdepartment Radio Advisory Committee made up of
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representatives of the using Government agencies. While this Commit-
tee should continue as a forum to arrange the use of the spectrum in
such a way as to avoid interference, it'is not an adequate.means for
keeping in order the large portion of the spectrum occupied by Gov-
ernment agencies.
5. The Telecommunications Coordinating Committee has served
useful function and should continue as a mechanism for interdepart-
mental discussion of telecommunications matters.
6. The whole Government telecommunications structure is an un-
coordinated one and will be eve; less adequate in the future than it
has been in the past to meet the ever growing complexities of tele-
communications. A new agency is needed to give coherence to the structur*
7. There is need for a better determination of the division in the
. national interest of frequency Space between Government and non-Govern-
ment users. To achieve that end, close cooperation between the Federal
Communications Commission and the proposed new agency will be necessary.
aelemmeadptions
1. There should be established in the Executive Office of the
President a three-man Telecommunications Advisory Board to advise and
Assist the President in the execution of his responsibilities in the
.4elecommunications field. This Board should carry out the planning and
executive functions required by the Tresidenttil powers to assign radio
fecequencies to Government users, and to exercise control over the nation's
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telecommunications facilities during time of national emergency or
war. It should stimulate and correlate the formulation of plans and
policies to insuro maximum contribution of telecommunications to the
national interest, and maximum effectiveness of United States partici-
pation in international negotiations. The Board should recommend
necessary legislation to the President, and advise him on legislation
in the telecommunications field. The Board should stimulate research
on problems in the telecommunications field. It should establish and
monitor a system of adequate initial justification and periodic rejus-
tification and reassignment of frequencies assigned to Federal Govern-
ment users, and, in cooperation with the Federal Communications Commis-
uupervise tho division of frequency spectrum space between
Government and non-Government users. While we believe that a three-man
board is preferable we recognize the possibility of appointing one
. man, a Telecommunications Adviser, to exercise the functions of the
,Proposed board.
2. The Federal Communications Commission should be strengthened
in funds and in organizational strUctureso it can better carry out its
duties under the Communications -Act Of 1934,. and can_participate more
.fully in Government-wide formulation Of policy.
3. Appropriate units within the Department of State should be
;trengthened for the bettor performance of the functions of .the Depart-
ment relating to telecommunications.
'Other Federal departments and agencies which have large
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telecommunications interests also should strengthen their machinery
for formulating telecommunications policy, and for relating that policy
to the other policies and programs served by telecommunications.
5. The Federal Government should step up its program for conduc-
ting and stimulating research in telecommunications, especially in those
fields bearing on propagation and frequency utilization. Such studies
would make it possible for the Government to take economic or techno-
logical changes promptly into account in revising policies for pre-
. serving the vigor of our private communications companies.
6. The proposed Telecommunications Advisory Board should give
-/
Special attention immediately to the stimulation of technological-
developments which will still further strengthen our overseas communi.-+
'cations. It should also formulate policies which would,insure_that
. these new technological developments will be used in behalf of the
nation as a whole, its industry and commerce, its sedurity and its
cultural exchange.
Policy of the United States'should be based upon the following
fundamental propositions:
a. The radio frequency-, spectrum is a world resource An the
public domain. Our Government must adopt policies and measures
, to insure that this resource is used in the best interests of
the nation, with due regard to the needs and rights-of other nations.
b. The United States, almost alone among the nations of the
world relies on privately owned telecommunications companies to:
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play the principal part in the country's tolotoMMUnications
system. It should continue to bo the policy of the United
States Government to encourage and promote the health of theso
privately owned companies as a vital national asset.
C. The United States telecommunications system is essential
to the national security, to international relations, and to the
business, social, educational, and political life of the country.
Hence, Government must remain alert to the problems of this
system, and be prepared to support measures necessary to insure
the continued strength of the telecommunications system as a
whole.
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CHAPTER II
PRESSURES ON THE RADIO SPECTRUM
The use of radio frequencies for communications has expanded
tremendously since Marconi first bridged the Atlantic with his
historic wireless signal on December 12, 1901. Research and de-
velopment in the4Past quarter-century have beenresponsible for most
of the additional utilization of the radio spetrum.
In the years immediately following Marconi's achievement, it
was thought that only a few frequencies in the lower portion.of the
radio spectrum were suitable for ceMmunications:and that they could
be employed only for limited purposes.
The Berlin Radio Conference of 1906, for example, considered
but two frequencies--500 kilocycles (kc) and 1,000 kc--and discussed
them only for ship-shore telegraphy. By 1912, the time of the
London Conference, use of the spectrum had broadened Somewhat,
ranging from 150 kc to 1,000 kc. In the early 1920s, even after
broadCaiiing had begun, frequencies above 1,500 kc were still con- .
sidered of little value for communications, but later in the decade
new emphasis on high-frequency operations and a general spurt in
demand for all communications led to a rapid exploitation of
additional portions of the radio spectrum.
The extension of use of the spectrum is summarized chronolo-
gically in the following table: .
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FREQUENCY SCALE 1
-0
-0 WAVELENGTH SCXLE
0
m NOMENCLATURE
a.
MODE Of TRANSINSSION?
0
GROUND WAVE
7:1
CDCD
03
CI)
(D SKY WAVE
DIRECT WAVE
8
0
CO
4=.
CD
CD
7:1
Co
A GLANCE AT THE
RADIO FREQUENCY SPECTRUM
SHOWING SOME OF THE BROADER FREQUENCY CHARACTERISTICS
1
) KC 30
I
100
300 1000
I
3000 10,000
KC 30
I
MC
I
100
I
MC 300 MC 1000
MC 3000 MC 10,000
I
MC 30,000 MC
poopgg
-c
.....,
lo
KM
1KM
100
IN
10
??
IM
10
CM
. 1C14
I
-c
-
, C
VLF
' LF
ME
HE
VHF
'
SHF
'a
EHF--c
1,/14F
c
Lomo RANGE
.MODERATE.TO
SHORT RANGE
OVER LAND
SHORT RANGE
MODERATE RANGE
OVER LAND.
OVER WATER
,
SHO RT
RANGE-I.
..
Cl
a
MODERATELY LONG RANGE OVER WATER
I
k SHORT RANGE I MEDIUM LJNQ RANGE
A
COI
? 0
DAY 1 RANGE DAY .1
DAY
1
DIE0114GHMRI ANGE
LONRANGE
C
k .
NIGHT
i
1
1...
QUASI OPTICAL
C
-
TFIE USEFUL RANGE VIA SKY WAVE TRANSMISSION VARIES W Th THE TIME OF DAY, SEASON, YEAR, AND PHASE OF THE SUNSPOT CYCLE.
GROUND WAVE
TRANS1NTTF-R
WAVE
DISTANCE
VOLUME
ATTENUATION EARTH
RECEIVER
VLF
LF
ME
61F
FREQUENCY SUBDIVISION
(VERY LOW FREQUENCY)
(.0W FREQUENCY)
(MEDIUM FREQUENCY)
(HIGH FREQUENCY)
F2 LAYER
140-36 KM
MODES OF TRANSMISSION
SKY WAVE
APE RAY
E LAYER
90 -140 KM
__---.11111111MPrak4..'4111111
IfftMk'.744'
40001("
2.400 ki
p 019:ANCE
CRITICAL RAY
NOTEz
IF. ONE REFLECTION
2F TWO REFLECTIONS
'NOMENCLATURE OF
FREQUENCY RANGE
BELOW 30 KC
, 30 TO 300 KC
300 TO 3,000 KC
:3p00 TO 30,000 KC (30 MC)
EARTH
DIRECT WAVE
FREQUENCIES
VHF
UHF
SHF
ENF
FREQUENCY SUBDIVISION FREQUENCY, RANGE
(VERY HIGH FREQUENCY) 30 TO 300 MC
(ULTRA HIGH FREQUENCY) 300 TO 3,000 Kic
(SUPER HIGH FREQUENCY) 3,000 TO 30,000 MC
(EXTREMELY HIGH FREQUENCY) 30,000 TO 300,000 MC
'RESIDENT'S COMMUNICATIONS POLICY BOARD - FEBRUARY 6, 1961)
MC
3
CD
CD
0 ?
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29,
Year Incident Usable Radio Spectrum
1901 Atlantic bridged
1906 Berlin Radio Conference 500 kc and 1000 kc
1912 London Radio Conference 150 kc to 1000 kc
1927 Washington Radio Conference 10 Ice to 23,000 kc
1932 Madrid Radio Conference 10 kc to 30,000 kc
1938 Cairo Radio Conference 10 kc to 200,000 kc
1947 Atlantic City Radio Conference ? 10 kc to above 30,000,020
The development of so valuable a natural resource as the radio
frequency spectrum is a matter of paramount importance. Despite
technical and operational improvementS-the-demand for freqUaticies-
has steadily crowded the supply within the usable spectrum. The
use of this resource should have the most careful planning and ad-
ministration within the United States and in cooperation with other
countries. Unfortunately, guidance and administration often have
been inadequate.
The Radio Spectrum
A determination of the possibilities for greater use of the
radio spectrum is a very complex undertaking. Each use of it,
whether an international broadcast carrying a news report thou-
sand i of miles, or the signal of a short-range navigation beacon
:making flecks of light on the receiver aboard a ship almost within
IShouting distance, requires the establishment of a channel in the
spectrum. Contrary to the layman' s opinion, the presently usable
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spectrum (10 kc to 30,000,000 kc) does not offer an unlimited num-
ber of channels. Consider the spectrum as a slice of the North
American continent a hundred miles wide running straight from the
East to the West Coast. Each channel may be thought of as a highway
through that stretch of land. Some of the highways are narrow,
-some wide, but each must-be somewhat wider than the vehicles using it.
Here a major danger to understanding of the problem arises. The
radio spectrum embraces nearly 30 billion cycles. Standard practical
refers to radio channels in terms of single frequencies. Hence hasty
judgment easily assumes millions of frequencies as efficiently avail-
able and wonders why there should be any problem. Another glance at
the slice of the continent and the highways will make the matter
clear. A center line runs along each highway, - just as a center fre-
?
ciyency lies in each channel. The hundred-mile slice-of the continent
would accommodate a vast number of white lines--even though that num-
ber would have ultimate limits. T? thinkof the white lines rather
than of highways leads to confusion. The radio channel occupies more
than the center frequency by which it is identified.
Each usable channel thus 'consists of a relatively small, but a
specific, part of .the radia spectrum. Depending upon the traffic it
- is to carry, it may be only a few cycles or several million cycles
.wideIn the language of engineering, the total channel width (or
bandwidth) required for a transmission of energy is the number of
cycles embracing 99 per cent of the total radiated power 'extended
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to include any discrete frequency on which the power is at least
0.25 per cent of the total radiated power. In double sideband
-emission (the type used in broadcast transmissions of intelligence),
the channel width-is twice the departure (tolerance) of the actual
operating frequency from the reference or assigned frequency plus
twice the bandwidth required to convey the particular intelligence
desired. The frequency tolerance is usually specified as a number
of cycles which is'a percentage of the reference frequency, and thus
increases with the number Of cycles representing.the reference fre-
_
_
queney. ,,The specified tolerance usually is the best it is practical
for industry to meet-in the design of equipment.
If the total U. S. requirements in terms of channels of various
widths were known, reckoning the spectrum possibilities would still
be exceedingly difficult because of the complex and varied manner
in which radio signals travel from the transmitter to the receiver.
In radio propagation, energy fed to the transmitting antenna pro-
duces electromagnetic waves in the space surrounding the antenna.
The energy radiated into space can be used to convey intelligence.
These waves travel away from the antenna with the velocity of
light. There are three principal ways in which they may pass from
_?
transmitter to receiver: 1. the "sky wave which travels up to
ionized layers in the earth's upper atmosphere (the ionosphere)
whence it ia reflected baCk to the earth; 2. the "ground wave,"
which travels along the earth without influence of the ionosphere;
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and 3. the "direct wave,"_ which travels as its ,name implies, on
the line of sight. Most long-distance-radio transmissions-con-81Si;
of the sky wave and most short-distance transmissions consist of
the ground wave. Many are a combination of all three.
Frequencies below about 300 kc (VLF. and LF) Are used for long-
distance ground-wave transmissions, particularly in regions such
as Alaska where physical conditions make blackouts of sky-wave
common. Frequencies from about 100 kc to 3000 kc (LF and MF)
generally are used for ground-wave transmissions for Moderate dis-
tances over water and moderate to short distances over land. During
the night, frequencies from approximately lpoo to 5000 ko generally
are itable for sky-wave transmission up to about 200 miles; indaytime,
frequencies from about 3 tip 8 mogaOycles (MC) usually aro satisfac-
tory for this distance. Long-distance sky-wave transmission gen-
erally is the most effective for frequencies from 3 to 12 Mc (HF)
during the night and 6 to 25 Mc during the day. Frequencies from 3
to 30 Mc are used for ground-wave transmissions for relatively -short
'distances over land and moderate distances over water. Those from
30 to 300 Mc (VHF) are usually employed for short-distance ground-
wave and direct-wave or optical path transmissions. Frequencies
'above 300 Mc (UHF, SHF, and EHF) are limited in use to distances
not greatly exceeding the line of sight. However, there may be
transmission to greater distances by way of the troposphere.
Simple arithmetic, obviously, is not alone enough to determine
the possibilities of use of the spectrum.
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Although the parts of the spectrum are not of equal usefulness
for all purposes?-each is in sufficient demand to give rise to
allocation and assignment problems. tse of the high-frequency portion
of the radio spectrum (4 Mc to 27.5 Mc) presents, the most serious
difficulty, because of the multipleapplicability of this portion
for medium- and long-distance telecommunications, tropical and long-
distance broadcasting, and other services, and because of its inter-
national aspects. Further, frequencies outside these limits are in
general not suitable substitutes. The possibilities of the high-
frequency spectrum have to be measured in terms of possible circuits
rather than frequencies since, in general, more than one frequency
assignment is required for each circuit. The number of possible ,
circuits which can be carved out of the spectrum depends upon the
type of circuit desired (radiotelephone, radiotelegraph, etc.); the
geographical location of the terminals; the time of day, season, phase
of the sun-spot cycle; the amount of power used; the type of antennas
used; atmospheric noise; questions of possible interference; number
of circuits operated by the agency; efficiency and effectiveness of
equipment and operators; availability and correct-use of propagational
data.
To provide continuous 24:-hour-per-day service for the average
circuit over a sun-spot cycle, it may be necessary to use five or
more frequency assignments for a single circuit in one direction.
As the number of circuits operated by an agency increases, the average
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number of frequency assignments required per circuit may decrease
slightly 'because of greater freedom in changing frequency to avoid
interference and multiple use of frequencies at different locations
and for different path lengths. On the average, about three high
frequency assignments are required daily for each one-way circuit.
Since communication usually is a two-way matter, most communica-
tions circuits require two one-way circuits and, consequently,
two complements of frequency assignments. - This dual need may not
be encountered on light traffic circuits.'
Further, on the average long-distance circuit requiring three
frequency assignments of, for example, 6, 10,and 14 Mc for night-
time, transition, and daytime operation (over the midpoint of the
path involved), the circuit cannot be maintained continuously un-;
less a frequency assignment of each order is available. In practice,
because of the greater requirements for frequencies below 8 Ma, the
supply of channels between 6 and g Mc (taking into account possible
multiple use of each frequency) determines the maximum possible num-
ber of 24-hour long-distance circuits. Fortunately, the situation
is not so bad as it appears At first glance, because of the propa-
gation characteristics of the high frequencies, which have multiple
Ase possibilities with geographical separation, generally as follows:
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Frequency Range
4 to 7 Mc
Possible Number
2LIEURligaii2121
7 to. 12 Mc
4
12 to 15 Mc
3
15 to 27 Mc
? 2
? The actual number of separate and distinct channels available
within any particular portion of the spectrum is not static but is
fluid, increasing with improvements in;equipment, operating tech-
niques, circuit discipline, availability and proper use of propaga-
tional data, need, and willingness to accept a-poorer grade ef
circuit. The actual separation between frequencies required to
provide the same grade of service has been continually decreasing
because of improvements in the stability and selectivity of equip-
ment. It is not expected, however, that there will be much greater
improvement in this respect. The possible frequency separation
throughout the high-frequency spectrum is essentially constant on
a percentage basis but not on a kilocycle basis. Consequently,
there are more possible usable channels between, say, 4-and 5 Mc
than there are between 13 and 14 Mc.
In the exploitation of a limited entity such as the radio spectrum,
+
it is essential that as the pressure for radio channels increases
there must be established alert telecommunications management to '
asbure equitable allodatieh of these channels. Further, it is
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essential that this management assure,, insofar as is economically
practicable, the use of the technical improvements in equipment
and terating techniques for increasing the intelligence transmitted
per kilocycle of spectrum space.
It-is as:diffidult to ovoluate.frequsncy'Utilization ca to
determine the possibilities of the radio spectrum. Efficient utiliza-
tion of radio frequencies can be obtained only if the user and regula-
tory agencies constantly keep-watch over the use of frequencies. Only
in this way can the regulatory agencies know which users make full use
of their frequency assignments and which have too many frequency.
assignments. It is estimated that a thorough analysis and control
program for the United States and possessions would cost $50 million
a year. Such a program would envision the use of U. S. monitoring
stations plus additional stations elsewhere throughout the world.
As the demand for frequencies increases, the necessity for better
frequency management will become greater.
There is no evidence that the United States has made any
serious attempt previously to measure the utilization of radio
frequency assignments by either industry or the: Federal Government.
There Is evidence that other countries have done some work along
this line.
The nations of the world have met periodically to conclude
treaties which regulate the use of the radio spectrumpto obtain
Standardization of Methods and prodedures, and to minimize interference.
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Nearly all countries have imposed additional regulatory measures in
their areas of jurisdiction to implement provisions of international
treaties, to prevent domestic interference, and to obtain the most
equitable distribution of frequencies.
The history of the international agreements through 1938 is
summarized in SectiOn 2 of the Federal Communications Commission (FCC)
"Special Report on Frequency Allocation to the Communications Subcom-
mittee of the Senate Committee on Interstate and Foreign Commerce,
. March 29, 1950."
World War II caused cancellation of the international telecommuni-
cations conference planned for Rome in 1942. As a result, the con-
ference in Atlantic City in 1947 followed a 9-year period in which the
nations did not get together to seek up-to-date agreements on world
use of the radio spectrum.
Ut S. Control of Frequency Allocation
The United States Congress has passed three majiir-aCts-and estab-
lished two commissions specifically to regulate various phases of
communications.. These acts were the Radio Act of 1912, the Radio Act
of 1927, and the Communications Act of 1934, since amended. The
commissions Were the ederal Radio Commission and the:Federal Communi-
cations Commission. Interested Federal Government departments and
agencies formed the Interdepartment Radio Advisory Committee (IRAC),
recognized by several presidents, and the Telecommunications Coordin-
ating Committee (TOO) as voluntary coordinating groups. The effects
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which these actions have exerted in the assignment and use of
.radio frequencies are discussed in detail in Chapter V of this
report.
In the armed forces during World War II, frequency allocations
were coordinated in the Frequency Allocation Committee (FAC) of the
Joint (JOB) and Combined Communications Board (CCB) of the Joint and
Combined Chiefs of Staff, respectively, and by organizations within
each department. Since the war the JCB has been by-tte---
Joint Communication-Electronics Committee (JCEC) within the Joint
Chiefs of Staff.
Ealationshin of International and National Organizqtions
The international and national organizations concerned with
telecommunications problems, plus various ad hoc committees and
delegations to conferences, make up a formidable array of groups
dealing with one or more phases of the problem. Inevitably, there
are overlapping of responsibility and gaps in authority. Few per-
sons understand this hodge podge. The complexity-of the subject
is Indicated by the chart in Chapter V, which shows the international
and U. S. organizations engaged in: some phase of radio spectrum
management or :use.
knesses in Presen Or anizations and ractices
Statutory Authority..--The limitations of the Communications Act
of 1934, as amended, and of the Commission created largely for its
administration have been the subject of much consideration by Congress
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in recent years. The law was written when radio was not so highly
developed and before the present demand for spectrum space had
become acute. It established a dual system of allocations as between
Federal Government and non-Governmentl/ users but provided no umpire.
The FCC is empowered to assign radio frequencies to non-Government
users and the President is likewise empowered to assign frequencies
to Federal Government users, a power he exercises through IRAC. Each
agency enjoys coequal authority over the entire spectrum.
Because of this dual authority over the same entity, it is
essential that there be full coordination between IRO and the FCC.
As a member of IRAC, the FCC is afforded, on the one hand, an oppor-
tunity to comment upon all assignments to Federal Government stations.
On the other hand, IRAC has an opportunity to comment upon proposed
FCC assignments when the FCC considers it necessary to refer the
proposal to IRAC. Final action by FCC does not require approval by
IRAC, but the reverse is not true; FCC as an IRAC member can veto
action desired by other Government agencies. In practice, the spirit
of accommodation has generally prevailed. But if there is disagree-
ment between the FCC and 'RAC, only the President can resolve the
issue. Upon at least one occasion during World War II, he was called
--
upon to do so. The fact that this system has worked at all is a credit
to the good will and common sense of the members of both agencies.
1/ Includes State and municipal government and all other than
Federal Government users.
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National Poli.--Both the FCC and IRAQ have been and are greatly
handicapped by inadequate national policy for the division and use
of the radio spectrum. To cite one instanc, lack of a clear policy
concerning the use of radio for domestic point-to-point telecommunica-
tions during the war led to long, bitter arguments in 'RAC. Such
meager policy as exists and could be collected is included in Chapter
VI of this Report. Much of it has not been previously reduced to
writing.
Allocation Practices.--There are several faults in the present
frequency-assignment practice. Contrary to the public impression
created by procedures for assigning frequencies for standard broad-
casting and TV purposes, the FCC in general does not require rigorous
justification for the assignment of frequencies for other services.
IRAQ does not require sufficient justification for the assignment
of frequencies has no authority to question any Government depart-
ment's statement of need for a frequency, and is not constituted to
do so. Assigning blocks of frequencies to be used by a particular-
agency on a national basis, without providing for their use by others
in areas where the original assignee does not use them or is not
likely to use them, is wasteful of frequencies and adds to the
crowding of the radio spectrum. For example there are many areas of
the U. S., Alaska, and Hawaii where there is littla prospect of need
or:of support for the existing 12 very-high-frequency television
channels, much less the greater number of ultra-high-frequency channels
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where use of these frequencies for other purposes would be in the
public _interest. Another example is the making of too many assign-
ments for broad band transmission, when the broad band is needed
only a very small percentage of the time. Waste also results from
the practice of assigning many of a user's frequencies to.all of that
user's stations, although the-frequencies are rarely used at more
than one or two stations.
Frequency Assignment Records.--It is fundamental that a storage
and issuing agency maintain a catalog and adequate records of stock
on hand and issued. In its management of the pricelessradio spec-
trum, however, the U. S. has failed to maintain in one place ade-
quate records of frequency assignments or deletions, or to publish
a list of such assignments. The latest list available for public
use was prepared by the FCC and reproduced by a private firm in
1949; it does not include the frequency assignments of the Federal
Government agencies and is not now complete for the non-Government
users. In the event a commercial user wishes to apply for frequency_
assignment for a circuit, he must search through this non-current
public list, the International Telecommunications Union (ITU)
Frequency List (oven more out_of date), come to Washington or retain
the services of Igashington consulting radio engineers to study the
44
FCC records, and then file a complete application.. This application
:incidentally gives notice to competitors that the requested frequencies
are reasonably clear and available for use.. The applicant has no
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opportunity' to determine beforehand if a Federal Government depart-
ment is using a frequency with which interference will result or if
such department will raise an objection. If Federal Governmont
objection is forthcoming, he must repeat the whole process.
Existing Situation
The rapid -growth of telecommunications in the nine years between
the Cairo (1938) and Atlantic City (1947) conferences led to greater
pressure for radio frequencies. More and more countries went outside
the Cairo service allocation bands, in derogation, to meet the increasect
requirements. The war, of course, prevented full coordination be-
tween countries to avoid and clear interference. This situation
was further complicated by the decision of some of the warring nations,
including the United States, to withhold internati=onal notification
of-new uses of radio frequencies and to reject any claims of prior
rights for any country registering a frequency after 1939.
-
Recognizing early in 1943 that the end of the war would present
many frequency allocation problems because of withheld notifications,
pent-up requirements, continuing large military requirements, and
enormously expanding commercial aviation and other new activities,
the United States began a consideration of postwar frequency allo-
cations, The U. S. Atlantic City proposal in 1947 was the outgrowth
..qL this preparatory work, of public hearings held in 1944 by the
FCC, and of the discussions in Rio de Janeiro and ,Bermuda in 1945
and in Moscow in 1946.
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The Atlantic City Table of Frequency Allocations was designed to
provide essential. radio services with adequate spectrum space. Fre-
quency usage within these allocations was to be regulated by an
engineered international list of circuit assignments which was de-
_
sighed to make the greatest use practicable of the radio spectrum.
From the point of view of frequency allocation, assignmerlt,and
use, the most tar-reaching agreements at Atlantic City were: (1)
revision of the frequency allocation table to provide, in the main,
exclusive bands for the five basic functions--fixed, mobilo, broad-
casting, amateur, and radiolocation services; (2) changes in the
amount of spectrum space allocated to these services; (3) procedure
for the preparation of a new international frequency list on the
baais-bf,sound engineering principles; and (4) the adoption of the
concept. of an International Frequency Registration Board (IFRB) to
register frequencies on a technical basis,/
The Provisional Frequency Board (PFB) was created to prepare in
draft form a new international frequency list on a basis of these
agreements, for submission to the Extraordinary Administrative Radio
Conference scheduled for The Hague on September 10 1950.
Upon approval of such -a list for the Atlantic Citi-Table of
Frequency Allocations below 27.5 Mc, the IFRB was to commence its
functions and a date was to be agreed upon for implementation. Post-
? l/ The IFRB and its work are covered in more detail in the"Final
Acte of the Atlantic City Conference.
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poned becauee-of-the international situation, the Conference is now
scheduled to convene in Geneva on August 16, 1951, if that date is
confirmed in April by the Administrative Council of the ITU.
The United States-participated, as did the other nations, in
the Atlantic City Conference and the work of the Provisional Frequency
Board, performed under the agreements reached at that Conference, for
the purpose of improving international telecommunications.
Conditions of unrest, cold war, and continuing international
crises generated an atmosphere that was hardly favorable to the
efforts of the PFB.
The Table of Frequendy Allocations between 4 and 27.5 Mc adopted
at Atlantic City in 1947 has not yet been implemented. Tentative
plans have been prepared for the aeronautical and maritime services,
and partially for the fixed services. The frequency list for the
Table of Allocations between 150 and 4000 kc, which are for the most
part regional in character, is ready within Regions 1 and 3 for final
- amendment and adoption. Region 2 (which includes the U. S.) has no_
_
414
regionally-integrated plan as of February 1, 1951, even though it is
about 85% completed below 2000 kc.
Experience gained from the past three years has highlighted the
difficulties of implementation under the procedures envisaged at
Atlantic City. Lack of plans and policy plays a major role in the
difficulty experienced by all countries concerned to agree upon im-
plementation. It was obvious to the Presidents Communications Policy
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Board, in view of the forthcoming meeting of the Administrative Council
of the ITU in Geneva in April, 1951, and the impossibility for.tho Board
to complete, in the time available, all the tasks assigned to it,
that special steps would have to be taken to overcome this laok.
In view of the extreme importance of this matter, the Board
considered it imperative that the United States re-examine the situa-
tion to determine:
-(1) The current scope and magnitude of the United States
interest in the Atlantic City AllOcation Table below
27.5 Mc.,
(2) The most workable methods by which the Table could be
implemented in the light of changed world conditions.
. (03) The course which the United States should advocate and
pursue in the light of findings under (2) heretofore.
Accordingly, in October and November of 1950, the Board discussed
the problem with the Under Secretary of State; thelDeputy Secretary
-of:Defense, and the Chairman of the Federal Communications Commission,
The Board proposed that these three officials constitute themselves
into an ad hoc committee and take responsibilityfor reviewing the
,political and teohnical difficulties contributing to the impasse -and
for recommending workable policies for the Government to follow, The
Board further recommended that this ad hoc group enlist the help of
a small panel of especially qualified persons, who would make an
objective appraisal of theDactors of national interest involved,
independent of the particular interests of any dlaimant agency.
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The proposal was accepted; the ad hoc group was formed, and the
independent panel set up in January, 1951.
Pawandita.1121...."rmufmat...-es.
-The?basic difficulty of the nations of the world in arriving
at a satisfactory frequency list and means of implementing the
Atlantic City Table is that of inflated demands for radio fre-
quencies. The apparent shortage of frequencies thus engendered has
been aggravated as each nation attempts to provide for future as
well as present needs. The United States also has been handicapped,
as perhaps have many other nations, by the necessity of remaining
on a, defense emergency basis which requires radio frequencies far
in excess of peacetime needs.
The demand for radio frequencies has been growing steadily since
the early 19001s. It was not until the beginning of World War II,..?
however, that that pressures became acute. During World War II the
increased requirements of the Federal Government, in particular the
armed forces, for radio frequencies were offset somewhat by the
closure of a number of facilities and the release of the frequencies
involved to the armed forces. Upon the termination of hostilities,
the borrowed frequencies were returned piecemeal to the FCC, commercial
circuits were reopened and many new circuits were established. At.
thesame, time, the armed forces found it necessary to continue many
of their overseas circuits, each of which required radio frequency
k
assignments. The tremendous expansion of the use of radio by many
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countrios which formorly had registered few frequency assignments,
the expansion of the high-frequency broadeastingservice
sion of the aoronnutical.service, and the reluctance to incur tho
expense of installing moro efficient typos of equipment have all
contributed to the crowding of the high-frequency spectrum. In the .
_
ton years between 1939 and 1949, the number of diScrete frequency
assignments between 4 and 20 Mc made by the U. S. was doubled. Tho
growth in listings in the ITU Frequency List between 4 and 10 Mc,
shown in the tablebelow, is indicative of the increasing demand
for frequencies.
aambor of Fromenc-z_attinag--ITU.Freauoncy Litt
4-10 Mc
1929
1222-
1949
U. S, Government
92-
377
3,189
U. S. Non-Government
71
381
929
' U. S. Total
163
758
4,118
World Total
1,698
6,08
21,46
The greatly expanded desires for the high-frequency broadcasting.
service--in'the'bands between 5.95 and 18 Mc, where the impact on
high-frequency telecommunications is groatest--rosultodjm an in-
crease in the Atlantic City Table of 450 lo or 43% over the Cairo
Service allocations in those bands.
Pressure'on other sections of the radio spectrum also has
become heavy. Established radio services such as that for aviation
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.
have been expanded rapidly to keep pace with the growth of the
activities they support and because of intensified use of communica-
tions in those activities. Additional room in the spectrum has had
to be found to accommodate these services. At the same time, new
services such as television broadcasting have been brought out of
the laboratory and have won public acceptance. Many entirely new
users?railroads, taxicabs, and trucking companies, for example--
have requested frequency channels. When the FCC held a public fre-
quend hearing in 1944, approximately 30 different radio services
were represented. Among them were the services concerned with the
safety of life-and property--the police and fire radio services,
the aviation service, the ship service, and the forestry service.
The total demands of these groups far exceeded the available spectrum
space.
The parts of the radio spectrum where pressure causes the most
serious concern are those in which international coordination and
agreement are required. Principally, they are the portions having
long-range characteristics, 4 to 27.5 Mc frequencies; the portions
used by services such as the aeronautical service, where standardi-
zation of equipment and procedures is essential; and broadcasting
in the Standard Band, which is of regional concern. Other portions
.of the spectrum are of national concern primarily and usually do
not involve other countries, except to provide common systems.
Within the United States, dissatisfaction with efforts to meet
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the pressure has often led to statements that Federal Government
users are responsible for the difficulty. Statements have been
made by some that the Federal Government users get too large a
share of the spectrum, to the detriment of industry. There are also
contests within the Federal Government for the spectrum space now
alldtgted for Government use.
These contentions raise two major questions. First, who are
the Federal Goifernment users and second, is the Federal Government's
share too large? The first question is easy to answer, whereas the
second is extremely difficult and can be answered only after an
exhaustive objective study of IL S. communications, Government
functions, and communications needs. Federal Government users are
those departments and agencies which require the use of radio, or
which can use radio to execute their functions more efficiently and
economically. They include the Departments of Defense (Army, Navy,
and Air Force), State, Commerce (including the Civil Aeronautics
Administration), Treasury (including the Coast Guard), Justice,
Interior, Agriculture, the FCC, and other agencies. The armed
services, the Department of State, and the CAA are the largest
Federal Government users of radio frequencies.
It is basic of course that the armed forces must have communi-
cations from the Department of Defense down to the most remote force.
These Communications may be thought of as command and administrative
? It-
channels between the Army, Navy, and Air Force and the various field
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commanders, and combat or tactical channels between field commanders
and their forces. - Since the armed forces may be engaged in areas
where existing communications to Washington are inadequate or
unsuitable, they must provide their own. Usually, existing commercial
international circuits cannot be used for reasons of control and
security. For example, the foreign terminals of commercial companies,
in most instances, are operated and controlled by foreign nationals
or governments and all traffic handled may be subject to scrutiny
and delay. Few if any of the proponents of greater use of commer-
cial facilities for the transmission of Government messages advocate
that military messages be routed through the commercial companies.
Where no interference to the flow of military messages results,
the communications facilities of the armed forces are used to trans-
mit traffic for other Federal Government departments and agencies and
the Red Cross. It has been suggested that this traffic should be
sent via commercial companies and that the cost would be less. The
stated policy of the armed forces in this matter is that no increase
er
in military facilities, equipment, or personnel shall result from
the handling of other department and agency traffic and that such
traffic will be accepted only on the basis of an official request
by the department or agency concerned. Military systems must be
designed with a reasonable amount of spare capacity able to absorb
greatly increased traffic loads on short notice. The armed forces
therefore feel that. the handling of maximum traffic within authorized
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capacity is an asset to training and general preparedness. Under
the conditions stated above, they question whether diversion of
this traffic to commercial interests would result in ;eduction in
Government costs or use of frequencies.
The Signal Corps, in addition to its defense functions, in
charged with operating telecommunications within Alaska, for public
correspondence, where the possibility of financial return has not
been sufficient to interest a responsible commercial company. Private
enterprise furnishes some minor non-competing services. Because of
Alaskals strategic position and the radio propagation conditions
existing there, the number of frequency assignments required per
circuit is much greater,than for comparable circuits in other parts
of the world. The need for radio in Alaska is also increased by the
lack of transportation and of wire communications facilities.
The Corps of Engineers is charged by Congress with certain non-
military functions in connection with river and harbor work and flood
control, and uses radio in carrying out its mission.
The growing use of radio by the Department of State for broad-
_ _
casting is the result of the international situation. --The Depart-
mentis use of radio frequencies is stated to be essential to the
carrying out of its function under the U. S. Information and Education
Exchange Act of 1948, "to promote the better understanding of the
United States among the peoples of the world and to strengthen coopera-
tive relatione.". International high-frequency broadcasting was
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selected as one medium to this end.
Under the Communications Act, Navy Department radio stations
and apparatus are made available for the reception and transmission
of press messages offered by newspapers published in the United
States or its territories and possessions or published by citizens
of the United States in foreign countries) and by United States
press associations. The act provides also for the use of Navy
facilities for reception and transmission of private commercial
messages between ships, between ship and shore, between localities ?
in Alaska, and batmen Alaska and the continental United States. Both
those services are subject to certain rate conditions, and it is
provided that they shall be discontinued whenever the FCC notifies
the Secretary of the Navy that privately owned and operated stations
are capable of carrying them on. The Navy also furnishes a general
broadcast service of weather, time, and hydrographic information to
all shipping.
In addition to its defense functions, the U. S. Air Force
operates weather flying squadrons for the collection of data for
weather forecast, collects and broadcasts weather information, and
furnishes communications to non-military aircraft in certain areas
Ilhere civil facilities are not available. These services all require
tho use of radio frequencies.
Radio frequencies are used by the Department of the Treasury
k
(Coast Guard) in providing marine navigational aids and safety services
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for shipping. The Coast Guard also operates the radiolocation ser-
vice known as Loran. Transfer of those operations to commercial
facilities could not be expected to decrease the total number of
frequency assignments required.
The CAA is charged by Congress with the function of providing
navigational aids and communications facilities as a public service
for both civil and military aircraft. If those functions wore turned
over in whole or part to private enterprise, the over-all number of
frequency assignments or the spectrum space required could hardly
be reduced.
The FCC employs radio to connect certain of its remote monitoring
stations. Instantaneous communication to all of these stations is
essential at times to identify an unknown transmiision or to obtain
a fffix? on an aircraft or ship in distress. It is considered imprac-
tical to lease the facilities of a commercial company for this work
or to turn over the function to a Commercial company.
Thus -we see that there is a large Federal Government requirement
for radio frequency assignments, and that much of it is for services
which would use the same amount of the radio spectrum even if they
were transferred to private operation. Another substantial portion
of it is for services which must for security reasons be operated as
they aro at present. The question may nevertheless be legitimately
raised whether the demands have been kept to a minimum in relation
to the tasks to be performed. Non-defense radio traffic of some
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Federal Government departments might in some instances be carried
by commercial facilities.
In 1939 the major international common carriers were operating
138 circuits, whereas in 1950 the international common carriers as
a group were operating 219 circuits (many at high word capacity) to
more than 100 foreign cities. Since the war the FCC in general has
followed &policy of granting competing companies circuits to the
same foreign city.
Since but one U. S. frequency list can be presented to the IFRB,
the Federal Government and non-Government frequency requirements
should be accommodated within such a list. At present there is no
national telecommunications policy under which the relative impor-
tance of particular circuits can be determined and the frequency
requirements screened. This factor assumes even greater importance
when one considers that the pressure on the radio spectrum is con-
tinually increasing.
The relative amounts of the spectrum used by the Federal Govern_ --
ment and non-Government users are often compared. The question is
asked whether the Federal Government has more high frequencies than
non-Government users, and whether it has more of the spectrum than
it needs. Available comparisons of high-frequency assignments have
been made on the basis of the number of discrete frequencies assigned
without regard to the band of emission and thus are subject to con-
k
siderable misinterpretation in many instances. This is evident from
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the fact that one telephonechannel with a band of emission of 10 kc
occupies 100 times as much spectrum space as one telegraph channel
with a band of emission of but 0.1 kc, yet each assignment counts as
one frequency, A fairer method of evaluating the amount of spectrum
space used by any agency is to take the sum of. the bands of emission
assigned to that agency. An analysis of the high-frequency spectrum
between 4 and 20 Mc as of May, 1950, reveals that although the Federal
Government agencies are allocated 1166 frequencies, they have but
4164 kc of the spectrum; whereas the non-Government users, with 833
frequencies, (excluding international broadcasting with 38 frequencies
and 380 kc of spectrum space and the amateurs with 700 kc of-space),
occupy 4324 kc of spectrum space./ A comparison of the spectrum
space allocated to the Federal Government and the non-Government users
for the fixed service by increments of 1 Mc follows, Table I.
-
1/ The faot that the sum (9567.73 kc) of these assignments is
considerably less than the 16,000 kc analyzed does not mean there
is unassigned spectrum space. The entire spectrum is not available
for assignment by the United States, but is shared with other
countries. In addition an equally large part of the spectrum is
used by the United States for transmission from foreign locations.
Abdkve 30 Mc the shorter interference range characteristics permit
full use of the spectrum by the United States, except immediately
adjacent to Canada or Mexico.
fiqddii
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TABLE I
FREQUENCIES AND SPECTRUM SPACE ASSIGNED-CONTINENTAL
UNITED STATES, TERRITORIES AND POSSESSIONS
(as of May, 1950)
Federal Government
? Non-Government
Shared
:No. df : Total ;
:Froquon-: Spec-
:cies : trpm :
Kc
No. of Total
Frequpn- : Spec-
cies : trum
No. of Total
Frpquen-: Spec-
cies : trum
Kc
Ice
4 Mc
167
676.20
74
335.35
4
19.25
5
152
589.42
92
446.15
6
106
352.65
61
258.05
7
46.00
7
70
236.30
63
325.30
8
114
389.69
75
272.17
6
24.10
9
69
200.16
31
192.80
10
52
190.30
76
377.36
11
64
236.82
41
147.45
12
84
253.98
33
121.55
13
54
177.37
57
408.00
14
30
106.87
27
203.00
15
32
129.29
59
339.70
16
69
239.59
40
129.12
17
64
231.89
39
207.40
18
26
96.20
40
361.00
19
1166
4164.23
833
4323.50
17
89.35
In the range 4-20 Mc, approximately 380 kc was Used for inter-
na-tional broadcasting (from the-continental U. S. and Hawaii) and
700 kc was allocated to the. Amateur Service. These assignments are
not included in the preceding table.
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Current channeling of the radio spectrum above 30 Mc does not:
permit a similar analysis. Neither are all the frequencies between
30 and 30,000 Mc equally useful for a specific purpose. Also, since
the frequency stability of equipment--its ability to remain on the
assigned frequency--may be expressed as a percentage of the assigned
frequency, the present channeling at, for example, 1000 Mc must be
about 10 times the channeling at 100 Mc. It follows then that 100
Mc of spectrum space in the region of 1000 Mc will not provide as
many channels as 100 Mc of space will in the region of 100 Mc of
space in the region of 100 Mc. The relative division of the
radio spectrum by megacycles of space between 30_and 30,000 Mc
between the Federal Government and non-Government is shown by
Table II.
Table II
Relativo Divial2a_a_Badio qwetrum
30 Mc to 30,000 Mc
(Based upon number of Megacycles)
-Portion_ Amount
of - of Federal Non-
glLUIMID &ace gs:iumaad laalMad 0,212.4 haa=
Mc - Mc Mc Mc Mc- Mc
30-300
_ 270
113.56
119.44
24.00
13,00
300-3000
2700
357.2*
1110.00
967.80
265.00
3000-30M
27000
112.21a
22.521,22
2650 00
2225.222
Total
29970
12345.76
11729.44
3641.80
2253.00
*Part of the space now allocated to the Federal Government is re-
served for future use by civil aviation, at which time it will be
shared with non-Government.
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This table shows that, contrary to general belief, the Federal
Government has exclusive use of. 42.1% of the space between 30 and 300
Mc and but 13.2% of the space between 300 and 3000 Mc, The Federal
Government has its largest percentage (44%) of any decade between
3000 and 30,000 Mc. If the analysis is based on a logarithmic
frequency scale, a method more nearly reflecting the actual possi-
bilities for derivation of channels in the spectrum, the relative
division of the spectrum is as shown by Table III.
' Table III
Ealgtive Division of Radio S ectrum in Percentaae
' Federal Government vs. Non-Government -
30 Mc
(Based upon
to 30,000 Mc
logarithmic scale)
'Portion of
-aPteSiEga.
Mc?
,7edoral
Government
Non-
aurnment
- Shared
Amateur
30-.300
29.7
57.0
8*5
4.8
300-.3000
18.8
43.6
28.3
9.3
3000-30 M
_1(112
2611
18.7
8 6
Total
28.2
45.7
18.5
7.6
While Table II shows the Federal Government has about 50% of
the total spectrum space between 30 and 30,000 Mc, Table III shows
that, based on the probable number of useful channels which can be
derived, the Federal Government has allocated for its exclusive use
less than a third. of the probable number of channels which can be
? deAved from the 29,970 Mc between 30.and 30,000 Mc,.
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The preceding discussion and comparison of the relative division
of the spectrum is not considered complete nor final. It does, how-
ever, show that ladle the contention that the Federal Government
has 50% of the useful radio spectrum is not strictly true, the
Government does have a large proportion. This large use of so valuable
a national resource demands adequate justification and the most care-
ful management to assure its operation -in full accord with national
policy and to meet proved need in the best interest of the nation.
A current major problem involving the relative division of the ?
radio spectrum and relative needs of the Federal Government and non-
Government users is that of finding adequate apace in the spectrum
for television. There are now allocated for television broadcasting
12 very high frequency (VHF) 6 Mc channels as shown by Table IV.
Table IV
VHF Channels
Channel No.
1.19.0.9-.Y.2.1-0.
54-60H
Channel NO,
ElgagaR191
180-186
2
8
3
60- 66
9
186-192
4
- 66- 72
10
192-198
-5
76- 82
11
198-204
6
82- 88
12
204-210
7
174-180
13
210-216
The spectrum space between 470 and 890 Mc or 410 Mc was reserved by
tlie FCC for ultra high frequency (UHF) television broadcasting channels.
To date, experimental licenses only have been issued in the UHF band.
k As the number of television stations in operation increased, it
became evident from resultant interference between stations and from
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field measurements that the theory of optical or lino-of-sight trans-
mission was inadequate and that transmission of the television fre-
quencies also took place by way of the troposphere. To assure that
the national television allocation plan should be based on the
soundest engineering foundation, the Commission released its order
of September 30, 1948, suspending action on pending and new applica-
tions for permits to construct television stations until the technical
phases of television allocation were resolved.
There is now pending the Commission proposal (Dockets Nos. 8736-
8975, 8976, and 9175) to reallocate the television channels to pro-
vide greater protection from tropospheric interference and to allo-
cate an additional 42 six-megacycle channels or 252 Mc of space in
the UHF band. This proposed plan, if adopted, will reduce the total
number of VHF television stations in the U. S. and the number allo-
cated to some areas. It will, however, provide for additional UHF
stations. The proposed plan contemplates the allocation of both
VHF and UHF tSlevision stations to the same community. There is
little possibility that a UHF station can compete successfully with
a VHF station. Within practical limits of power, a UHF station
cannot serve as large an area as can a VHF station. For a considerable
period after the UHF stations commence operation, particularly in
cities where there are VHF stations, there will probably be few
UHF receivers and consequently a limited audience.
These technical problems and the recent agitation to reserve
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a number. of VHF channels for educational purposes serve to increase
the pressure for more VHF channels for the rapidly growing tele-
vision industry. Television interests are continually pressing for
more spectrum space in the VHF band or immediately adjacent thereto.
Assuming the validity of the need of television for the 42 additional
channels adjacent to the present 12 channels, the problem becomes
one of finding 252 Mc of continuous spectrum space between channels
Nos. 6 and? and above Channel No. 13. Thus the question arises--
Can the services now allocated these frequencies move, and if so,
to where?
An examination of the present allocations in the 86 Mc between
88 and 174 Mc reveals that the Federal Government is allocated 28
Mc; non-Government is allocated 30 Mc; and 24 Mc iSlallared by
Federal Government and non-Government. Of the Federal Government
allotment 16 Mc is within the VHF band which the U. S. was forced
to use to work with its allies in World War II and which is used for
essential military purposes. Only the remaining 12 Mc offers any
possibility at all for TV channels (2). Twenty of non-Governmentts
30 Mc are allocated to the culturally and technically important FM
broadcasting. Even if all of this space were reallocated to tele-
vision, it would yield only three channels. The 24 Mc shared by
aderal Government and non-Government is used for aeronautical navi-
gation and aircraft control, part of the 80-31 system of instrument
landing of aircraft. A great investment of time, money, and develop-
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ment resources has been made in this system and it cannot be changed
overnight. At best, then, not more than 5 TV channels could con-
ceivably be allocated between 88 and 174 Mc. This would leave 37
chinnels or 222 Mc to go above 216 Mc, the present upper limit of
VHF-TV.
Until January 1, 1952, when the agreement with the British to
use the band 220 to 231 Mc for the British Radar Indicator System
at U. S. gateways terminates, the nearest frequency above 216 Mc
where a TV channel could start would be 240 Mc. Provision for 39
additional channels or 222 Mc would extend the TV band up to 462 Mc,
well above the upper limit of thZ) VHF band or 300 Mc, and -into the
present UHF-TV band. Such an allocation would necessitate moving
and finding new space for the aeronautical radio navigation "Glide
Path," also part of the SC-31 Instrument Landing System, Meteorol-
ogical Aids, Amateur, essential military services, and non-Government
land mobile services. ?A number of these allocations and uses, for
example, the Glide Path and Meteorological Aids, involve agreements
and treaties with other nations and could be changed only with great
difficulty and delay. Many of these allocations and uses involve
great investments in time, money, and development resources which
cannot be wasted.
The investment in time, money, and development resources is
proportionately important to the television industry. At the end
of 1948 the estimated investment in tangible property of television
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stations and in receivers was $403 million. By tho end of 1950,
even though no new station construction permits were granted after
September, 1948, there were 107 stations serving about 10.6 million
receivers. Manufacturers have reached large scale production of
receivers and during December produced 704 thousand receivers._ At- the end of 1950 the estimated investment in tangible property of
television stations and in receivers had grown to about 83.09 billion.
Television net time sales for 1950 were estimated at about 884 million,
compared with 828 million ih 1949. This rapid increase in the number
of receivers and investment makes much greater the impact of changes
in frequency assignment. Even should additional channels become
available between the present No. 6 and 7 channels, most of the
older receivers would require adapters or converters to receive them.
Delay in solving this problem multiplies the difficulties and ex-
pense of making the necessary changes.
The problem of finding sufficient spectrum space for television
has defied solution since the beginning of postwar planning in 1943.
It can be solved only after the most careful study and weighing of
competing needs of all concerned to arrive at a solution in the best
national interest. By no stretch of the imagination could it b
resolved by a temporary board. This major problem in itself empha-
sizes the need for a high-level permanent agency concerned with
telecommunications and with the resolution of conflicting Federal
Government and non-Government requirements.
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Summary
In the 50 years since it inception, use of tho radio spectrum-
has grown into an enormous, vital, and complex activity connecting
all countries with means of rapid communications. The radio corn-
munications systema which have developed are of major importance-t-0--
the United States and to the world in the dissemination of infor-
mation and maintenance of security and welfare, and in the conduct
of business.
With the development and expansion of radio, the need for
regulation, both national and international, has grown until the
resulting organizations, treaties, and agreements have become as com-
plex as telecommunications itself. Most of those organizations and
agreements were devised to meet an existing need and not in anticipa.-
tion of future needs. Frequently they were not established formally
untilolong after they started to function. Once formalized, legis-
lation and organizations to deal with telecommunications have not
been kept current with this dynamic activity. The condition of "too
little and too late" has held more often than not.
Existing organization to control use of the spectrum, one of
the moat valuable natural resources of the United States, is rea-
vnsible for the establishment or continuance of dual control of this
resource. This dual control has led to friction, misunderstanding,
waste, and avoidance of responsibility. The Organization is lacking
k
in over-all policy guidance, and so Complex that few persons understand
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all its ramifications.
Weaknesses in the present United States telecommunications
organizations and lack of high national policy and direction have
hindered the United States in the national control of telecommunica-
tions and in its international relations on telecommunications. The
present telecommunications legislation and organization have failed
to produce adequate direction, leadership, administration, and
control and have fostered dissension between the Federal Government
andj.ndustry. Many of these shortcomings could have been mitigated
if not avoided.
The United States ratified the Atlantic City 1947 International
Convention, including -adherence to the Atlantic City Table of Fre-
quency Allocations and aasociated radio regulations. Over three
years later, there has been no acceptable position and plan for the
implementation of this Table for more efficient and orderly use of
this limited resource.
Experience of the past three years has highlighted the diffi-
culties of implementation under the procedures envisaged at Atlantic
City. Lack of plans and policy plays a large part in the inability
of all countries concerned to agree upon implementation. It was
obvious to the Board, in view of the forthcoming meeting of the
Administrative Council of the ITU in Geneva in April, 1951, that
special steps would have to be taken to overcome the lack.
Accordingly, in October and November of 1950, the Board dis-
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cussed the problem with the Under Secretary of State, the Deputy
Secretary of Defense, and the Chairman of the Federal Communications
Commission. The Board proposed that these three officials constitute
themselves into an ad hoc committee, and take responsibility for
reviewing the political and technical difficulties contributing to
the impasse, and for recommending workable policies for the Govern-
ment to follow. The Board further recommended that this ad hoc
group enlist the help of a small panel of especially qualified persons,
who would make an objective appraisal of the factors of national in-
terest involved independent of the particular interests of any
claimant agency.
The proposal was accepted; the ad hoc group was formed, and
the independent panel set up in January, 1951.
Since the beginning of World War II, the allocation of radio
frequencies has been increasingly an engineering and executive matter
-
and not merely a record-keeping problem. However, the U. S. has
failed oven to maintain adequate records of frequency assignments.
Sound frequency management could find ways of greatly reducing the
pressure of the demand for radio frequencies, bringing it more into
keeping with the supply. Under present management and policy, that
pressure- has grown to dangerous proportions. In the ten years between
1939 and 1949 the number of discrete frequency assignments between
4 and 20 Mc used by the U. S. was doubled. The growth of U. S.
international long-distance broadcasting has greatly increased the
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- --
demand for frequency assignments. In the critical world situation,
there is little chance that the pressure will be reduced. The only
solution is improved policy for the use of radio and better manage-
ment of the radio spectrum.
Most of the differences of opinion between the Federal Government
and industry users of the radio spectrum spring from lack of informa-
tion concerning the relative needs of Government and industry for
radio and the relative division of tho spectrum. Previous estimates
of the relative division of the spectrum have been based on non-
representative methods of evaluation. Measured in terms of spectrum
space rather than number of discrete frequency assignments, the
Federal Government's share, though not so great as is commonly
believed, is nevertheless large. While we do not know whether this
use is out of proportion to the Government's responsibilities, it is
apparent that it must have the most adequate justification and careful
management if the greatest benefit is to be obtained from this resource.
Pressures for additional, suitable channels in the VHF region
for television broadcasting pose a major immediate problem. By the
end of 1950 the estimated investment in tangible property alonb of
107 television stations and 10.6 million receivers amounted to about
3 billion. Teleiision net time sales for 1950 were estimated at
about 014 million. Most of the existing receivera:will_have to be
modified or provided with adapters to receive additional channels
regardless of their location in the radio spectrum. The great growth
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of television broadcasting, agitation for the reservation of VHF
channels for educational purposes, and the discovery of tropospheric
interference have demonstrated that 12 VHF channels are insufficient
to meet the stated needs. The space desired for television is now
used for essential services of the Federal Government and nen,,Govern--
-
ment users with great investments in time; money, and development
resources which should not be jeopardized by moving the peremptory of
these services, In addition, the entire VHF band of 270 Mc is insuffi-
cient to accommodate the apparent desire for a total of at least 324 Mc.
This Board is of the opinion that a $ 3 billiOnr rapidly growing
industry and a multi-billion dollar Federal Government investment for
defense, civil aviation, nd other essential non-Government services
cannot long be loft in this uncertain situation. Because of the rapid
increase in the number of new, individually-owned receivers over- --
700,000 in December 1950?frequency allocations cannot be changed
easily and mistakes reach far into the future. This major problem
alone emphasizes the need for a high-level permanent agency concerned
with telecommunications and with the resolution of problems involving
the_interest of both the Federal Government and non-Government users.
No temporary Board could hope to resolve them.
The high frequency portion of the spectrum between 4 and 27.5
Mc presents the gravest problem because of its multiple use for
medium and long-distance telecommunications, tropical and long-distance
broadcasting and other services, and because of its international
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aspects. Better-and-more:far-sighted management and regulation
might have averted some of these difficulties. The full possibili.,
ties of the radio spectrum have not yet been realized, but are being
approached. Exploitation of the spectrum is not static but is fluid,
increasing with the cooperation and good will of users improvements
in equipment, operating techniques, circuit discipline, need, and
willingness to accept a poorer grade of service where necessary.
It is not likely that the improvements derived from these measures
will keep pace with the demands unless energetic steps are taken
to establish an agency competent to assure the best circuit dis-
cipline, equitable allocation of frequency channels, and full use
of technical developments.
Conclusions
1. Pressure on the radio frequency spoctrum is steadily in-
creasing as a-result of the greater ilAe of radio in telecommunications.
2. Tho moans on which we have relied in the past for manage-
ment of the spectrum are no longer adequate to resolve in the best
-
national interest the problems produced by this increasing pressure.
The current difficulty growing out of the search for suitable space
for television broadcasting in itself emphasizes this inadequacy.
3. Measured in terms of spectrum space rather than in number
*
of discrete frequency Channels, the Federal Government's share of
the spectrum, though not so great as is ,commonly believed, is never-
theless large. While we do not know that it is out of proportion
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to the Government's responsibilities, it must have the most adequate
justification and careful management if the greatest benefit is to
?
be obtained from it.
4. There is need for a continuing determination of the changing
requirements of Federal Government users both among themselves and
In relation to the requirements of other users.
5. The recent rapid worldwide growth of telecommunications,
combined with tho needs of the current national emergency, makes the
resolution of those problems a matter of great urgency.
6. The resolution of theso problems can be secured only through
adequate, energetic management, which demands that the Government
organize itself to take a comprehensive view of the telecommunications
field.
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CHAPTER III
UNITED STATES TELECOMMUNICATIONS AT HOME
oac,
Our normal'industrial and commercial life is dependent upon the
.transmission of millions of messages and conversations each day.
A rapid flow of information is necessary to the operations of
Government. Public health and safety require rapid telecommunica-
tions. Quick transmission of communications in storms, floods, fire,
epidemics and strikes facilitates control, rescue, remedy, and ren-
toration. In keeping with our traditions of a free press and public
enlightenment, millions of words are transmitted annually for publi-
cation in print and by radio broadcast.
The persistence of the demand for telecommunications is shown
by what happens when either of the two basic systems--the telephone
and the telegraph--is unable to maintain service.
Between April 7 and May 20, 1947, a large number of telephone
company employees were on strike. The public telegraph load in the
month of April jumped more than 8 million messages above the previoun
month and produced additional revenues estimated at $7.4 million.
Conversely, during a telegraph strike in New York City from January
8 to February 10, 1946, telegraph revenues dropped almost $3 million;
a 'Substantial portion of that amount went into abnormal telephone
receipts.
it National Defense.--The country's telephone and telegraph resources
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provide the the backbone of military telecommunications in time of
emergency. The dependence of the armed forces upon the domestic
telecommunications facilities of the United States is indicated
by the following statement made to the Board by the Department
of Defense:
"The nerve system of National Defense is the sum
total of all communication systems that are available,
operationally and potentially, for the prosecution of
any emergency or war effort. Tho operational existence
of nation-wide systems of rapid voice and record communi-
cations in peacetime is indispensable from the standpoint
of meeting the wartime requirements of both the military
services and the civil economy. As the intensity and com-
plexity of warfare continue to increase, correspondingly
greater demands will be placed on the communication systems
of the nation from the standpoint of both circuit capacity
and flexibility of operation. It is, therefore, considered
in the vital interest of National Defense that there be
maintained within the United States to meet that need as
many nation-wide commercial communication systems as are
economically feasible."
Cl Defense...-. Since the outbreak of the Korean action in Junes
1950s the attention of the people and Government--Federal, State,
and city..-hen been drawn to the need to plan and organize for civil
defense.
For the aver-all national interest there must be sound, modern,
efficient nationwide systems for, the rapid handling of telecommunica-
?tione. From the standpoint of national security and civil defense,
and in view of the possibility of sabotage, strikes, and catastrophe,
k
duplicate systems should be maintained. Circuits between key points
? should not be concentrated in one cable, on one pole line nor on
_
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one radio beam route. Nor should all terminal equipment serving key
points be housed in one building. The dispersion and duplication of
facilities should be considered in all telecommunications planning
for the future. In planning the defense of our cities against
bombing, we need to be sure that communication can be maintained
both within and between cities, and that emergency means are available
for communication with the populace by radio.
2122_222.22012.11gtems..-Altheugh the telephone and telegraph
systems do not offer precisely the same kind'of service, each can
and does serve at least as a partial substitute or replacement for
. the other for emergency telecommunication. Much of their outside
plant facilities can be Used interchangeably.
/ To provide the nation with an adequate system for both peace
and war, these two basic networks for telecommunications should be
developed and maintained. Practical considerations will limit the
extent to which alternate routings will be feasible; but within those
limits, each network should maintain separate inside and outside
plant facilities with alternate circuit routes and' terminals.
In the discussion which follows, the soundness of the nation's
telephone system is apparent. On the contrary, the telegraph industry
has passed through a succession of crises which probably are not over.
Orent improvements in the position of the industry afford an oppor?
tunity to develop information needed for sound, long-range planning
to Avoid future difficulties ,fle believe that sound management
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and vigorous technological development can contribute further to
the stability of the domestic telegraph system.
The Telephone System
The nation's telephone system consists of the Bell System with
approximately 34 million telephones -together with some 50000-
independent telephone companies operating an additional 8-tillion
telephonesI
1/4
Units of the Bell System are the American Telephone and Telegraph
Company, its general departments and its long lines department, 20
Associated Bell operating companies, Weetern Electric Company, and
the Bell Telephone Laboratoriat. The independent companies are
served by a healthy manufacturing industry which has pioneered many
important technical advances such as the use of dial telephones.
Description of-the Bell. System
The Bell System's primary undertaking is the furnishing of
telephone service. Through interconnecting' arrangements with the
independent companies, it provides domestic local and long-distance
telephone service to the 42 million U. S. telephones, and international
telephone service with nearly all of the balance of the estimated 72
million world telephones.
The Bell System also leases to its clients: telephone and tele-
graph. circuits for various- domestic services, maintains a teletypewriter
-
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exahange service (TWX), a telephone service to land mdbile'units aid
to aircraft, and telephone service to overseas points and to ships
at sea, the latter divided into two categories, coastal harbor and
high seas.
? The Bell System in 1949 had total assets of nearly $11 billion
and a gross annual revenue of nearly $3 billion. It owns Or controls
about 80% of the telephones and receives about 90% of the revenues
of the domestic telephone systems.
General reliance upon telephone service is so widespread in the
nation that to itemize uses of it would be to labor the obvious.
Its public acceptance is evidenced by the fact that there is now a
telephone for every 4 persons in the country. For the present pure
pose, this over-all contribution of the telephone industry to the
national interest is taken for granted, and other individual contri.
butions are discussed specifically.
The Bell System an_kSecur_zdteNati.it
The national security requires that there be avail-able, to expand
or supplement the military communications system, a nationwide effi..
cient, integrated, and diversified domestic telephone system operated
by persona loyal to the United States. Defense planning should also
include multiple automatic communications systems on a national grid
Attachment III-A gives selected Bell System statistics which
reflect the size, growth, and importance of the Bell System and some
comparative data with the totals for all telephone carriers for 1949.
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_
?to insure continuous operation if key points are destroyed. Further,
we must plan for essential expansion, and stock critical materials.
Efficient, fully functioning civil operations which support the
military operations are also necessary to a successful war effort.
To function properly, civil activities such as commerce, manufacturing5
transportation,, exercise of Government, civil defense, fire protec.-
tion and public information must have adequate rapid communication.
In time of national emergency, the communications networks must
be expanded to include many new manufacturing plants and military
posts. Communications must be provided for fire protection and guard
systems for these plants and posts. Convenient telephone pay stations.
_
must be furnished for workmen and military personnel. Frequently, _
trunklines as well as local facilities must be expanded.
In World War II the Bell System provided 400,000 miles of inter-
city leased circuits and 2,600 teletypewriter stations, built new
facilities for over 3,000 military establishments, and provided
600,000 telephones for them. Aircraft warning service was provided
for 58 Information and Filter Centers, handling Army Flash Calls at
:a peak rate of 30 million annually._
During World War II public telephones were installed at 201
_camps (housing over 5,000 men each), at 376 attended locations in-
Alving abbut 3,000 attendants and nearly 19,000 telephones. Tele-
phone facilities were also provided for 88 hospitals with 1,000 or
m86 beds, with 102 attended locations, 584 attendants .and 'Wei`
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4,600 telephones.- The demands of World War II -increased the tele-
phone calls per Month from 2.8 million in 1940 to 3.3 million in '
- 1945, an increase of 18%4 To meet these requirements, the Bell System
expanded from 17 million telephones, 89 million miles of wire, and
$4.7 billion invested in plant in 1940 to 22 million telephones, 99
million miles of mire, and $5.7 billion invested in plant in 1945.
The Bell System provides trainecItelecommunications personnel.
In World tar I, 14 telegraph battalions were formed with men from
the Bell System. In World War II, communications specialists cadres
were designated to provide a nucleus of experienced telephone men
within each of 380 Signal Corps units. For these units 4,250
officers and enlisted men came from the Bell System. Over 400 addi-
tional Bell System specialists volunteered under this plan for desig-
nated commissioned staff positions in the Signal Corps In all,
nearly 70,000 mon and women from the Bell System entered the military
services during the war. Four affiliated units mere ordered to active
duty in 1950 after the start of tho fighting in Korea. In addition,
many trained civilian telephone operators replaced military operatorg.---
During World War II the Bell System operated 26 plant schools,
training 7,235 men for the armed forces.
The system's laboratories helped materially in the development
oflnew tools of mar. Tolephono research conducted in peacetime proved
to be valuable .in many military problems, enabling the Bell labora-
torles to make major contributions to such projects as gun directors,
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rockets, torpedoes, guided aerial missiles, detection of submarines
and magnetic mines, airplane crew trainers, propagation of micro-
waves, and microwave relay equipment. In all, over 1,200 military
research projects wore carried through to completion.
The extensive resources of the Boll System also mean that large
quantities of critical items of materials and equipment can be stored
for war emergency use.
The extensive manufacturing facilities of the Western Electric
Company, a Bell System subsidiary, made it possible to produce large
.
quantities of urgently-needed equipment for communications and
military purposes.
Tho Bell Snd he National Economy
The Bell System in 1949 received for its domestic communications
services nearly $3 billion. It paid out about $2 billion in wages
and salaries to somo 600,000 employees, and about $346 million in
taxes, and collected for the Federal Government about $444 million
in excise taxes. Operating disbursements of about $500 million, in
addition to wages and taxes, were made to other companies and indi-
viduals. Dividends of about $216 million were paid to nearly a million
stockholders. Capital expenditures of over $1 billion were made for
expansion. The systemis major contribution to the national economy,
di$ficult to measure in dollars but nonetheless real, is the increase
in business attributable to the convenience of rapid communication.
k The Bell'System and the connecting companies network provides
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widespread facilities for distribution of international wire and
radio telephone messages. These facilities connect the nearly 42
million telephones in the U. S. with nearly 30 million telephones
in 86 other countries of the world. In 1949 about 620,000 overseas
and high-seas telephone calls were completed, producing about $7
million in revenue.
Trends in the Bell System
Technolo ical Trends.--The domestic telephone communications
systems have made many mechanical and technical advances which have
improved the quality and speed of service. The "hearability" of
the telephone has been improved about fourfold in the past 20 years
through the use of newly-developed equipment and techniques. Greater
use of automatic equipment has reduced the average time of completing
toll and long distance calls from 1.8 minutes in 1948 to 1.5 minutes
, in 1949) with 95 out of every 100 being completed while the calling
party was holding the line.
Dial telephones have been increased to 73% of the total. New
type toll switching systems enable customers in large areas to dial
their own calls directly to other cities beyond their local calling
areas.
The provision of the teletypewriter exchange has made it possible
fer,k any one teletypewriter to be connected to any other of the 25,000
teletypewriters in the system.
Coaxial cable and microwave relay have appreciably increased the
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available channel capacity and improved in great measure the quality
of electrical transmissions.
Manual switching or relaying has been greatly reduced through
the use of improved automatic switching systems. Toll dialing equip-
ment is now in operation to permit operators to dial toll calls
straight through on 25,000 toll circuits to over 600 cities or towns.
auvaLlIggag2.--Since 3.939 average hourly earnings in the
telephone industry have increased 70% and costs of materials have
increased more than proportionally. For instance, in 1949, electro-
lytic copper was 2.2 times its 1939 cost, zinc 3.3 times the 1939
cost, and lead 3.38 times the 1939 cost. These rising costs have
been offset in part by oper6ting economies and by local rate increases.
From the early days of the telephone revenues from local service
have generally followed business conditions, lagging behind somewhat
and fluctuating to a lesser extent. Through the years there has
been an increase in the number of local calls that can be made without
increasing the subscriber's monthly bill.
World Thr II started another cycle of rising costs which the
company has sought to offset by requesting increased local rates.
With earnings below the average of the previous 25 years, the Bell
Telephone Companies, faced with rising costs and wages and the need
tb expand plant facilities, in 1946 secured local rate increases in
8 states and requested rate increases in 16 others. By 1949 increases
intloeal rates had become effective in, or had been requested in,
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practically every state. Though increases in local telephone rates
have varied for different classes of service in different places,
the increases requested (including those already granted) averaged
about 20% of the Bell System revenues.
The U. S. Treasury Department 1947 study entitled "Excise Taxes
on Communications" summarized the subject of rates as follows:
"Rates charged on local telephone service vary among
localities and are subject to differences in State regula-
tory practices. Following increases made after World War
there were no important changes in basic rates until
1946. There was a slight decline between 1935 and 19410
but no change in prices to consumers during the war except
for the increase in excise tax. Although basic rates re-
mained substantially unchanged for a long period, the rate
of return permitted to be earned has shown a long-term
decline. Rates probably were not reduced during the period
between the wars because the increase in the demand for
local telephone service apparently leads to higher unit
costs which the companies have only been able to offset by
technological developments and increased employee work loads.
Because of higher costs, rates are now being increased."
Since 1919 interstate long distance rates have been periodically
reduced, under the jurisdiction of both the Interstate Commerce
Commission and the FCC. Over the period, 14 reductions have been
made. Most recent action was taken on January 19, 1951, when the
FCC directed that A. T. & T. and its 20 affiliates in the United
States file a statement before March 23 on the basis of which decision
wOuld be taken on a possible interim reduction of long-distance rates.
Bearings to determine whether existing ratee are unjust, unreasonable
and burdensome were scheduled to begin April 16.
4. The Commission's order was taken as occasion by the National
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Association of Railroad and Utilities Commissioners (NARUC)-..
representative of the state oommiscions whose responsibility is for
intrastate rates as distinguished from the interstate toll rates
with which FCC is concerned?to petition to intervene and seek
enlargement of the issues. The NARUC move was strongly endorsed by
Senator Ernest W. McFarland of Arizona, Chairman of the Communications
Subcommittee of the Senate Interstate and Foreign Commerce Committee1
In a letter to the Commissioners, January 30, 1951, Senator McFarland
said in part:
"The problem of disparity in telephone rates has disturbed me
for a long time although I appreciate that it is commendable on
the part of the Federal regulatory agency to be vigilant in
attempting to avoid an inordinately high return to the American
company on its plant investment. The trouble is that the
general public does not realize that every move that is made
to reduce long distance toll rates results directly or indi-
rectly in an eventual increase in local exchange rates and in
intrastate toll telephone rates
IISome of the examples...of differences between an interstate
toll rate and an intrastate rate for an identical or nearly
identical mileage are almost fantastic. For instance, tho
three minute station-to-station rate between Florence and 'Yuma,
Arizona, is $1.05 while the rate for the samo service between
'Yuma and WinterhavenICalifornia, is WO although the telephone
route mileage is identical, namely 197 miles...,
"We all know that the nationwide telephone plant is a complex
and closely integrated structure and that over the years no
separation formula has boon wholly fair or wholly satisfactory
either to the American company and the associated companies or
to the 48 state commissions. But one thing is clear to all
of us--there would be no long distance toll business without
the local plant and the local telephone instrument in each home
and business.,..
uThe fact remains that while the Commission (FCC) has ordered
long distance rates lowered, local exchange and intrastate rates
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have steadily increased, Moreover, while wages and other general
expenses of doing business have increased tremendously, those
who use-the long distance actually get cheaper service. In my
judgment, this anomaly ,cannot be explained away by merely in-
oisting that greater volume of long distance business has
brought this about since it is clear without any question that
the basic volume increase is due largely to the tremendous
expansion of local facilities."
Tho Western Union Telegraph Company also filed a petition to
Intervene, on the ground that a substantial reduction of long-distance
rates might adversely affect its financial stability. The General
Services Administration of the Federal Government also petitioned
to intervene, citing that the Government is among the largest single
customers of the Bell System.
Total taxes on the Bell System's telephone service in 1949 aggro-
gated nearly $800 million--an increase of about $100 million over 1948.
Since the early days of the telephone, the gross revenues of the
telephone systems and in particular the Bell System have increased
rapidly except for a temporary regression following 1930. By about
1940 the Bell System had again reached the revenue level of 1930,
and the impetus of World War II increased its earnings oven more- --
rapidly until in 1949 its gross revenues were nearly $3 billion.
The capital investment, operating expenses, and taxes showed
the same general rise from 1925 to 1950, increasing more rapidly
since World War II. As a result the per cent return on capital of
*
'?..thej3e1l System (including Western Electric) showed a steady decline
from a high of 8.7% in 1927 and1928 to 4.3% in 1933, then fluctuated
A
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between a high of 7% in 1940 and a low of 4.5% in 1947, reaching
4.9% in 1949. The average roturn for the 25.-year period was
Through 1931 the A. T. & T. never failed to earn its dividend.
In the next 17 years, there wore 9 years when the dividend was not
earned but was paid partly out of the surplus accumulated over the
years. The Bell System at the end of 1949 had n surplus applicable
to_A. T. & T. stock of over $340 million.
With minor exceptions there has been for some years a monopoly
of telephone service in each aroa. Rates and services) instead of
being controlled by competition, are now regulated by State commissions
and the Federal Communications Commission. Although there are more
than 5,000 telephone companies in the U. S., the Boll System is the
dominant unit in the domestic telephone communications field. Actual
ownership of the Bell System is now in the hands of nearly 1 million
stockholders.
General Trends.--The growth of the Boll System reflects the im-
portance of the telephone to U. S. industry and social life.
The requirements of the public for rapid, flexible record cot---
munications led to the expansion of the Bell System's private line
service, begun before 18900 and its teletypewriter exchange service
(TWX), started in 1931. Together these total nearly 48,000 stations,
4ith revenues of $46 million in 1949.
Mobile radio telephone service for ships and small craft has
aisted for a number of years. State and city police have used private
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mobile radio telephones since the early 19301s. The second world
war increased the demand for communicationa in all circumstances.
In response to this requirement, the Bell System in 1946 inaugurated
the new domestic public land mobile radio telephone service, pro-
viding for connection via radio and wire with any other telephone
in the nation. By the end of 1949 it was available in 144 areas, and
on certain railroad trains.
kausaaalffacilna_11122221.2m12m
Public demand is a powerful instrument in shaping the policy and
operations of. the Bell System. Demands for better quality and faster
and.cheaper service, and the company's pride of performance, have led
to many technical and Operational improvements. Subscriber objec-
tion to delaya in completion of toll calls and the ever-increasing
volume of calls stimulated the establishment of the toll dialing
system. Demands for long distance telephone service beyond the
capacity of existing plant facilities led to the development of the
? carrier system, the coaxial cable, and the microwave radio relay.
Through arrangements between Western Union and the telephone
? company, a telephone subscriber may dictate a telegram to the Western
Union operator and have the cost charged to the monthly telephone bill.
The telephone company Collects the charge, 'deducts its commission
far the work performed, and pays Western Union. Conversely, Western
Union frequently makes delivery of telegrams by telephone, In addition
tokthe normal telephone service furnished to Western Union, the
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telephone company also leases considerable circuit mileage to Western
Union for its use. At the same time, the Bell System competes with
Western Union for record communication business through its tele-
typewriter exchange service, private line teletypewriter, and some
telegraph service.
The Bell System is closely related to other domestic telecommu-
.nications systems such as are used by broadcasting, airlines, and
other companies, because it leases to them the circuits whioh make
those systems possible-.
Tho Telegraph System
Rapid record delivered telegram service in the United States is
provided principally by the Western Union Telegraph Company. The
service involves the carrier's taking possession of a message, charging
for it on a word-count basis, and convoying it by rapid means to the
addressee. The business came into being something over a century
ago, displacing the Pony Express familiar in American legend. During
the past twenty years, the telegraph 'business has undergone a number
of economic vicissitudes. In an effort to overcome these, the Congress
in 1943 permitted merger of the Postal Telegraph Company with the
Western Union-Telegraph Company. As the company neared the start of
its second century, increased business and industrial activity in the
United States and increased alertness and aggressiveness on the part
of Western Union's management combined in April 1950 to change the
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earning status of the company for the better. Western Union in
1950 showed an encouraging not income after several years of deficit
operation.
Tho troubles of the telegraph industry gave concern to Congress
as many as fifteen or sixteen years ago. The 1943 merger action
stemmed from those troubles. Recommendation has boon made from time
to time that a thoroughgoing leng-range study of the problems of tele-
graph communication should be made by appropriate Government authority.
The most recent such recommendation was that of the Federal Communi-
cations Commission in 1946, but the necessary funds were not made
available by Congress. Present performance and immediate prospects,
however encouraging, do not eliminate the need for such a study.
DQs0IARtig.11 0...11 P.4 ella....111.4.9n .kaf3E-r,V1.1.-2.9.121.0nZ
Since. its incorporation in 1851,11estern Union has gradually
developed into an integrated nationwide telegraph system through
purchase, lease, or stock ownership Of more than 500 telegraph proper-
ties. The merger of the Postal Telegraph company with Western Union
in 1943 virtually colploted this process. The system operates as a
regulated monopoly under the provisions of the Communications Act,
Which places regulation of interstate and foreign communications by
- telephone and telegraph, both wire and radio, in the hands of the
Federal Communications Commission. Purely intrastate wire communica-
tion does not fall within Commission luri;diction.
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The provisions of the Act require that common carriers subject
thereto furnish service at reasonable charges upon reasonable request.
Without Commission approval, carriers may not construct or acquire
interstate lines or curtail or discontinue service. All charges,
practices, classifications and regulations must be just, reasonable
and non-discriminatory. Common carriers file with the Commission
tariff schedules for regulatory purposes.
Western Union as it operates today under this public sanction
webs the nation with more than a million miles of open wire and almost
380,000 miles of wire in undergound and overhead cables. This outside
plant, directly or through tributary lines of telephone companies,
servos almost 30,000 public telegraph agencies and offices and 22,000
private customer offices scattered over the nation. addition, 42
million telephones in the United States are available to the subscri-
bera for the filing or receipt of telegrams.
Over 41,000 employees received more than $125 million in 1949
for operating and maintaining this system. More than 174 million
domestic telegram messages were handled in 1949, producing revenues
of $141 million at the average toll of about 82 cents per message.
Net invebtment in this communication plant runs over $172 million.
The largest customer of Western Union is the United States
Government, which as a single user, provides more than 3% of the
total domestic operating revenues of the company.
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?Western Union offers a number of telegraph services, including
straight telegram, serial, day letter, night letter, telegraphic
money order, telemeter service, leased wire, custom-built tele-
graph systems, commercial news service, and illustrated telegram
service. In addition, it handles correct time service, messenger
errand service, messenger distribution service, collection and re-
mittance service, and American Express money orders and travelers'
checks. -
While, historically, Western Union has been and still is a
wire system, it has recently begun to utilize radio in several
applications. One of those is the use of microwaves (radio beam)
to replace wire for trunklito channels. Another is the "telecar
I service" which involves pickup and delivery of telegrams by
cruising automobiles connected by radio with the central office.
Still another is the marine reporting service, involving the re-
porting of vessels to the central office by radio from pilot vessels.
By far the bulk of the traffic today is recorded on automatic
typewriters called "teleprinters" or on typing reperforators. The
old-fashioned manual Morse system is disappearing, while the fac-
simile method may emerge as a fully automatic device requiring little
operating labor. AB the name implies, this method aims to reproduce
attbe"eceiving end the material as offered for transmission--
written, printed, typed, or drawn matter.
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With the United States today a loader in world affairs, the need
for efficient international communications is obvious. International
telegraph communications originate at or are destined to places all
over the United States. Hence a pickup and delivery facility is
necessary. This facility is provided for the general public by the
Western Unionts nationwide system of wires and offices. The system
serves not only Western Union's overseas cable service but those of
other overseas cable and radiotelegraph companies. However, in gate-
way cities most of the commercial overseas companies handle t large
percentage of theirown pickups and deliveries.
Western Union and National Securitz
Witla a few exceptions, the armed forces of the United States do
not construct or own domestic wire telegraph networks. Their domestic
telegraph requirements are met by normal telegram service provided by
Western Union and by lease of facilities from the telegraph and tele-
phone companies.
'Potential demand for telegraph services in any future war may
be gauged by the demands made upon the telegraph industry in World
War II. Federal Government domestic messages rose from 2.5 million
in 1937 to more than 14.5 million at the war period peak it 1943, or
almost six times. In addition, the armed forces began to lease tele-
gll'eph lines from Western Union in significant volume in 1938 and these
facilities reached a war peak of 1,800 miles in 1944. The growth of
=Oh service has been accelerated in the postwar period and had
reached 78,000 miles in September 1950,
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The telegraph industry also provides an immediate source of
"know-how" and facilities to meet special communications require-
_
ments of the military. -In World War II, Western Union was called
upon to handle more than 7,000 spodial telegraph projects for war
purposes. These included development of special equipment to meet
military requirements, adaptation of existing equipment, and many
research assignments.
In peacetime the telegraph industry provides a ready reservoir
of trained communications personnel. More than 10,000 employees
of Western Union and Postal entered military service during World
War II. Assuming that the bulk of these performed military duty
for which they wore already trained, the military was thus relieved
of much training effort. The industry not only had to train addi-
tional personnelt handle increasing war business, but also had to
train replacements for these who entered the armed forces.
Well over $5 million was expended by the telegraph companies
to set up and operate training organizations. Taking advantage of
the achool facilities, the militarY fitted hundreds of members Of
the armed forces into these groups, in order to reduce its own mam-
moth training job.
Apart from huge increases in the carriage of message, special
dircuit facilities and equipment were supplied to the Department of
State, the Federal BUrODU of Investigation, the Maritime Commission,
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the Office of Strategic Services, the Office of War Information,
Army, Navy, Army Anti-submarine Control, British Admirqlty,
British Air Commission, other governmental agencies, and many
large basic war industries. Special telegrnmcservices were created,
including the casualty message procedure the Expeditionary Force
Message, the Homeward Bound Message, and the reduced rate telegraph
money order.
Telegraphic communication "know-how," research, and development
contributed to the solution of many military communications problems.
Special automatic equipment and circuits were involved, such as
radio multiplex, telekrypton, telefax, varioplex on ocean cables,
multiple film scene selector, reperforator switching, means for
generation of additional channels from existing wire line plant,
etc. While some of these-activities produced results applicable
in peacetime, others tended to defer the normal long-range program
of modernization.
Western Union and the National Economy
Significant measures of Western_Union s participation in the
domestic economy Ett6 the following rounded figures for 1949:
Total net investment in communication
plant $172,0000000
Operating revenues $1710000,000
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Total telegraph offices . 29,400
Telegraph revenue messages handled 174,000,000
Number of employees
(October 31, 1949) 41,600
Total employee compensation 425,900,000
Total interest charges
(domestic and overseas) $ 3,150,000
Federal and State taxes -
- paid by company $ 5,775,000
Federal excise taxes -
paid by customers $ 36,500,000
Trends in Western Union
? alhao_1(2g1012_Trends
---
Transmission of domestic telegraph messages for many years was
accomplished-almost wholly by the manual method, employing the
Morse "dOt-dash" code.
In 1915 Western Union began a series of technological improve-
ments with the introduction of the "automatic multiplex telegraph
system" on its trunkline network; -In this system the-circuit is
"multiplexed" into two or more channels, each of which can carry a
message in two directions simultaneously. The system is "automatic"
in that the sending operator, by operating a keyboard, punches a tape
which is automatically fed into the system and the transmission i?
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automatically received on an electric typewriter: at the receiving
end of the channel. The new system improved accuracy and speed of
service, raised the productivity of operators, and obviated large
capital expenditures which would otherwise have been necessary to
carry increasing volumes of traffic with equal or improved quality
of service.
In 1926 a modified version of the automatic system, known as
the "simplex printing telegraph system," was applied to circuits con-
necting main offices to branch offices and to smaller independent
offices in other communities. By 1928 most of the telegraph companies'
branch offices had been so equipped. At this point, to round out the
automatic system, the telegraph companies began making installations
of this type in the offices of larger customers.
Because, with little instruction, an ordinary typist could send
and receive telegrams on them, these electric telegraph "typewriters"
were well received by the larger users of the telegraph service. The
installation of simplex printers made it unnecessary for a customer
who wanted a rapid service to employ a Morse operator. The telegraph
companies were also interested in avoiding the delay and expense of
Messdnger pickup and delivery. .Today more than 20,000 such printers
are in customers' service and many thousands more are in use in tele-
graph offices operated directly or indirectly by Western Union itself.
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Even with the automatic system, a telegram moving across the
country had to be typed manually from two to six or even seven times
en route. To eliminate such labor-consuming, delaying, and error-
producing manual re-transmissions, the company initiated a limited
program of reperforator switching at its larger relay offices. By
1943 several of its larger offices had been converted to this type
of operation but, because of war conditions, the program was more
or less suspended. Following the merger of Postal with Western
Union in the fall of 1943, an extensive program to modernize and
mechanize the combined operation and plant and to improve telegraph
service was planned.
Insofar as reperforator relay switching is concerned the pro-
gram, originally scheduled to be -completed in seven yuars? was
speeded up in January 1946. The dire necessity for reducing costs
and improving handling methods accelerated the reperforator switching
plan to the extent that the objectives sought at the time of merger
are today practically realized. In this system each area relay
center has direct circuit connections with every other area relay
center, thus avoiding relays through intermediate centers.
In the early 19301s Western Union undertook to investigate the
?possibilities of facsimile to transmit and record reproductions of
printed, typed, and hand-written copy. The system was tried on both
intercity trunk circuits and on short lines between the customerst
andkbranch offices and main offices. By 1934 it was determined that;
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in its then state of development, facsimile had a speed in words
per minute far below that of other eystoms in use at the time.
Nevertheless, developMental work continued and some installations
wore made until the project had to be suspended during the war.
Emerging after the war was the desk-fax, a small and relatively
inexpensive machine capable of sending and receiving messages. The
operation requires no skill. It is fully automatic once the message
blank is placed in the machine and the starting button depressed.
As part of Western Union's postwar program, more than 2,000 desk-
fax units have been installed in-customore offices._ The company's
management believes that the desk-fax promises to solve, in part
at least, the perplexing problem of quick and economical pickup and
delivery of telegrams.
, -
To assist in the solution of the pickup and delivery problem
at branch and "agency" - offices, installation of transmitting and
recording facsimile equipment designed to handle a substantial volume
of telegrams is part of Western Union's current program of plant
improvement.
One of the heavy expense burdens borne by the communications
industry is tho construction and maintenance of its trunk circuit
plant. Over the years, Western Union has continued the erection of
etronger and better pole lines, replacing the less desirable and less
efficient iron wire with copper, and substituting underground cable
for aerial lines in congested areas.
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In 1934 Western Union commenced the use of carrier current
telegraphy in its network of trunk facilities. Carrier operation
permits the derivation of a multiplicity of circuits from a smaller
number of wires. Even when the cost of the terminal-equipment
necessary to derive the additional circuits is deducted, the savings
over the construction of new wire lines are high.
By 1944 carrier current telegraph had developed to the extent
that installations between New York and Washington provided 36 high-
speed two-way telegraph circuits on two physical wires. By this
time, it was clear to Western Union that carrier operation was a vast
improvement over the "ground return" single wire trunk circuit opera.-
tion then in general use.
Western Union's wire plant in 1930 comprised 219,000 miles of
pole line and over 1.5 million miles of open wire. The merger of
Postal with Western Union in 1943 added 31,000 miles of Postal line -,
and 334,000. miles of wire, but because of its physical condition,
most of this equipment was dismantled after World War II.
By 1950 Western Union's wire plant had contracted to 205,000
milea of pole line (of which 98,000 miles are railroad lines shared
by Western Union) and to a little over 1 million mileh of wire.
-In addition to this plant, the company installed and operates
ritiore than 800 miles of multi-channel radio beam, and leases from
the telephone companies 1.25 million miles of carrier channels.
The demands of World War II accelerated research and development
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98 .
- in the use of radio, particularly on frequencies above 30 million
cycles. Much was learned about the behavior and use of frequenclea__
from 30 million to 10 billion cycles. From this research, it has
become possible to adapt radio beams to the transmission of record
communications.
Radio beam (microwave) relay involves the construction of a
series of towered radio stations along the desired route, spaced
about 30 miles apart. The beam system obviates the otherwise neces-
sary continuous rights of way, pole lines, cross arms, and wires.
As a result of the mechanization program, Western Union states
that its modernized telegraph plant is capable of handling more than
double the present telegraph volume. Percentage utilization of plant
available for message business as of October 1950 was as follows:
Daily peak period (one-half hour)
32%
Over 24-hour weekday
11%
Over Saturday-Sunday weekend
4%
The company declares that it recognizes the vital importance
of maintaining separate trunking systems as between oral and record
communications. Asked what its intentions were as between leasing
of trunk-line facilities from the Bell System and the continued
construction of its radio beam system, Western Union told the Presi-
dent's Communications Policy Board on November 6, 1950:
HContrary to the impression that may have boon created
by Western Union's increasing use of facilitates leased from
telephone companies in recent years, Western Union has at
the present time and intends to retain in the future a com-
prehensive network of physical facilities entirely independent
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99.
of telephone facilities...*
"Western Union has substantially completed large-scale
rebuilding of its circuit facilities on an FM carrier
basis. This has involved the transposition and loading
of physical wires on which FM carrier was imposed, the
addition of FM carrier on radio beam voice bands and as
required, on leased voice bands. Its radio beam system
linking New York, Philadelphia, Washington, and Pittsburgh,
is in operation, and in connection with the expansion of
this system the Company has planned routes across the nation
and has acquired tower sites as far west and south as
Minneapolis, Kansas City, Dallas, and Atlanta.
"These plans reflect Western Union's recognition of
the advisability, in the in'...erest of national security,
that a nationwide network of telegraph trunking circuits
be for reasons of physical security separate from the cir-
cuits carrying voice communications. Given favorable econo-
mic conditions and the high level of demand for circuits
that makes radio beam systems economically justifiable, we
envisage over a period of time a radio beam system pro-
viding trunk facilities between major cities, replacing
leased facilities and some parts of Western Union's
existing wire plant.
"The speed and extent of the expansion of the radio
beam system are necessarily dependent, however, upon the
establishment of National Policy. Western Union's ability
to obtain necessary capital funds for the expansion will
be influenced in major degree by the establishment of
National Policy strengthening its financial position; and
the expansion can be justified as a matter of economics
only if National Policy is formulated to the end that
telegraph traffic which has been diverted from Western
Union be returned to it."
As of December 31, 1949, Western Unionls outside plant facilities
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MileLof Ling
100.
Percent
Jointly
Facility
Owned
Ownal.
Leasad
Loml.
Pole Line
88,169
13,272
6,359
5.90
Wire
1,030,000
11,00
25,750
24.10
Aerial Cable
72,758
_ .
19,308
257
.27
Underground Cable
260,012
15,057
1,992
7.20
Channel
300 cycles
150 cycles
Other
.1,/ Almost
. _CarxigsAyptem Miles
On Owned On Owned Leased Voice Percent
Wires hlaig_Dgam. Frequency 1/ Leased 1,/
72,908 6,908 36,531 31.4
212,641 75,216 1,206,240 80.7
7,898 - -
wholly from A. T. & T. and associated companies
The relative
costs per telegraph channel mile assuming the
actual asaignments made to the various types of service, were stated
by Western Union in October 1950 as:
1. For Western Union lines $19.70
? 2. For lines leased from telephone company 5.30
3. For microwave 6.30
In summary, basic technological developments in Western Union
? have been directed not only toward economy in investment, reduction
? iq operating expense and_improvements in existing services, but also
toward new services. Some of these are telemeter service and private
automatic telegram systems, and currently, a private telegraph network
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involving automatic switching centers located in Western Union offices
and operated by Western Unidn personnel.
Service Trends
Western Union's basio service is the transmission of telegraph
messages; this is supplemented, as has been' explained, by a number
of allied services including the leasing of circuits. Discussion
of service trends hence involves message business, which can be
measured by the number of telegrams transmitted and by the revenues
they produce, and non-transmission business, the most convenient
measure of which is revenues.
Message Business.--About 80% of Western Union's income is_pro-
duced by telegrams, the most important of which is the full-rate
so-called "day message," which brings in almost 75% of the company's
total public message aervice revenues. Business messages--those
concerned with commercial transactions as distinguished from personal
' and social matters--account for about 75% of the total message volume,
The 'general trend of Western Union's message volume between 1927
and 1949 was downward. The reduced rate serial service after a fast
build-up in 1934, had steadied down to about 7.5 million messages in
1949. Money order messages, on the other hand, show a rather healthy
long-range growth.
44 The reduced rate "timed wire service" classification, which had
reached a peak of 8.5 million pessages in 1949, was ordered discon-
tinued by the Federal Communications Commission because it was found
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to be unjustly discriminatory.
The reduced rate greeting message--a "social" rather than "business"
service--had reached a record volume of 22 million in 1941. Thin
service and all other non-essential activities of Western Union were
_ _
- -
ordered discontinued by the Board of War Communications in 1942 in
order to clear the lines for essential war traffic. They wore not
restored after the war.
The number of Government transmission messages averaged around
7.5 million per annum between 1926 and 1941, rose to a peak of over
14.5 million per annum during the war years, then fell off to an
average of about 3 million, standing at less than 2.5 million in 1949.
The trend is similar for non-Government messages but not so pronounced.
These messages totaled 189 million in 1926 and dropped erratically
thereafter. They numbered 151 million in 1949.
With these changes-in the character and quantity of transtission
messages, the total of all messages dropped by 30 million or 14%
between 1927 and 1949; because of rate increases, however, revenues
rose by $11 million or 8% over the same period. 1/
Western Union's message volume is sensitive in two ways to the
marked increase in the number ef telephones in the United States.
The total of telephones of the Boll System, which serves over 80% of
the country's telephone subscribers atood at about 12 million in
iJ Attachments III-B and III-C
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103.
1925, 17.5 million in 1940, 22.5 million in 1945, and over 33 million
in 1949. The telephone has probably taken over social and personal
business from the telegraph. The increase in the number of telephones
has increased the number of direct avenues to telegraph service, since
Western Union receives messages by telephone for transmission,
through cooperative billing arrangements with telephone companies.
Growth of air-mail service is another factor, taken into account
in analyses of reasons for the decline in telegraph message business.
The question of dependability of delivery--a major consideration in
business transactions such as supply 75% of Western Union's message
volume--hore has to be balanced against savings in cost.
Non-Transmission Businoss.--Non-transmission service revenues
increased from about $8 million in 1927 to almost $20 million in 1949,
a rise of 150%. Leased services and money order charges show almost
a steady climb during the same period. Measured service (telemeter),
for which the customer who is on a fixed connection with another
customer pays a rate based on the monthly accumulative number of
words transmitted, has grown from $36,000 in 1936, when the service
,was established, to almost-$2.5 million in 1949. it_ Altogether,
non-transmission revenues, which represented about 5.5% of all operating
revenues in 1927, had risen to 11% of the total in 1949.
1 A substantial portion of the increase in non-transmission business
1/ IkAttachmont III-.D
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104.
came from the increase in leased circuits. These in 1927 had pro-
duced revenues of slightly more than $2 million; by 1949 the figure
had risen to $7.5 million. An?illustration of the growth of leased
facilities in the latter part of the period is given by data from
Western Union on facilities leased to Government agencies:
Miles of Number of Western
Year Revenues Circuits
Union-owned Printers
OmMIWOMMI?mi*,.?????0
1937
4,800
100
4
1944
790,500
57,300
250
1949
1,421,200
106,000
470
1950
1,726,300*
135,000
600
*Estimated on basis of first eight months actual.
. -
Some organizations operating leased facilities estimate that they
are saving from 20% to 40% of whattheir telegraph expenses would
otherwise be; it is likely that the increased use of leased circuits
has contributed to the decline in message business. An isolated
case cited by Western Union is a drop of 50% in monthly public message
revenue at its main office in Schenectady, New York, which is explained
as "caused mainly by the conversion of the file of our largest customer.
there (General Electric) to a leased wire system set up by Western
Union for that company."
Need for thorough study of the situation is indicated by the fact
that though the leasing of circuits is growing, is regarded as saving
Tuley for lessees, and is probably reducing Western Union's message
business, the question whether leasing gives Western Union any profit
carlhot be firmly answered. In response to an inquiry from the Board
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as to the profitability of leased wire service WeStern Union reported;
The factors involved in a study of the over-all economics of
.private wire systems are exceedingly complex, so that several months
would be required for completion of -6 study in process, and a direct
answer to?the question ceuld-hot be given.
2. The profit margin, if any, as indicated by the study thus far,
is small. The rental of out-station equipment and switching center
equipment is almost certainly done at a loss..
In its response, Western Union took occasion to comment that:
"In the operation of private wire service Western
Union has been faced with the Hobson's choice of meeting
the rates of the Bell System, in which private telegraph
and TWX systems are an insignificant part of the total
revenues and upon which a profit is relatively unimportant
to the well-being of the telephone system, or go out of the
business and see an ever increasing proportion of the volume
record business diverted to the Bell System. Until there
is an over-all integration of rates for communications
service in accord with a national policy of fostering some
economic conditions in the industry it seems that the kind
of chaotic situation that now exists in this field will
continue."
Influence of TWX.--Revenues of the teletypewriter exchange service
(TWX) to which Western Union referred have shown_a significant in-
crease. In this service, the carrier provides the necessary terminal,
teletypewriter equipment at the subscriber's location and the desired
circuit for operation 'by the subscriber in the same manner as-in -
pUblic telephone service. Time rather than words serves as the base
for the tolls.
In 1931, the first year TWX service was offered to the public,
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revenues amounted to only $7,000. They climbed steadily to a peak
of $23 million in 1943, fell to $13 million in 1946 and again climbed
to almost aS million in 1949. Private lino teletypewriter service,
without the exchange feature, brought the telephone companies $25.5
million in revenues in 1949, as against $9.5 million in 1935.
But here again there is need of knowledge. In October 1949 the
Chairman of the Communications Subcommittee of the Senate Committee
on Interstate and Foreign Commerce requested the Federal Communications,
Commission to furnish information on the TWX service of the Bell
System. This subcommittee wanted data particularly on the TWX rate
structure, on whether the present rates would be compensatory if that
service were an independently operated organization, and also on the
extent to which TWX is servicing all business or only the lucrative
part thereof.
The Federal Communications Commission, in responding to this
request, regretted "that it is not in a position at this time ,Arch
. 19507 to furnish your coMmittee with reliable data which-wouId provide
the basis for some determination as to the extent to which current
'rates for TWX service rendered by the Bell System Companies are com-
pensatory to those companies,". pointing-out that Bell System repre-
sentatives estimated that a current study would cost between $400,000
aid $500,000 and require on their part from four to six months, and --
that to study hadbeen made since one in 19350 which is not considered
reliable for application to the situation today.
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The Commission also made the following points
1. On March I, 1944, overtime rates for TWX service were
reduced from about one-third of the initial period rates to about
one-quarter, resulting in estimated annual savings of$2,;4 million
to users. _
2. On February 1, 1946, the initial period rates for con-
nections in excess of 350 miles were reduced by amounts ranging
from 5 cents to 65 cents, depending on the distance, with the over-
time rate and report charges being reduced proportionately. These
reductions resulted in estimated annual savings to users of $1 million.
Production.--The value and trend of operator productivity at
Western Union central offices in terms of equated messages per hour
Worked are shown in Attachment III-E. From an average figure of
about 61 messages per hour in 19410 production fell off during the
war years to a low of about 55 in 1944. With the postwar introduction
of reperforator switching, production has climbed steadily to a high
) of 113.2 equated messages per hour worked in June 1950.
The average number of revenue messages per man-hour in 1929 was
1.54. The current series shows an almost steady climb from 1.71
to 2.13 for this measure and indicates in effect improved efficiency
in the amount of labor time applied to _the handling oi" each massager'
The figures are:
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Average Number
Revenue Message
Transmission Units 2/
leer (thousands)
Aggregate Hours
Paid For g/
(thousands)
108,
Average Number
Revenue Message
Transmission Units
Per Hour Paid For
1944
233,192
136,297
1.71
1945.
245,162
132.476
1.85
1946
221,248
120,518
1.84
1947
224,629
107,917
2.08
1948
202,317-
100,911
2.00
1949 186,031
87,205
2,13
1950 (7 months) 2/
45,064
1/ Western Union Annual Report to FCC, 1949
2/ Western Union Commercial Department Wage and Hour Reports
V Not available December 1950
Speed of service performance and the trends for periods for which
data were readily available are given in Attachment III-F. These data
represent the quality of service at the 25 largest traffic offices
in the United States.
The relay drag figure represents the interval between the time
a message is received at a relay office and the time it is sent to
,another office. The figure for reperforatop.switching offices
averages about 8 minutes less than for manual offices, standing at
8.8 minutes in June 1948, and at 7 minutes in August 1950.
The trend of the manual figure is likewise ,downward since September
1948. The combined figure dropped from a high in 1943 of 14.8 minutes
.to 9.6 minutes in August 1950.
The average origin'to-destination speed of service is shown by
the lower graph indicating, an improvement from the rates in September
1948 to January 1950..,-From then, the trend is upward again, standing
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in August 1950 at 40 minutes for tie-line deliveries, 44 minutes
for telephone deliveries, and 48 minutes for messenger delivery.
As the foregoing figures suggest, perhaps the oldest and most
perplexing operational problem in the telegram service is the
terminal handling problem. Today a telegram may be economically
speeded across the country in a few minutes, but to get it to the
transmitting office and to deliver it from the receiving office
economically and speedily is another question.
While the terminal handling problem is not yet solved--and
indeed may not ever be fully solved?data on Western Union terminal
and originating handlings show the following trends in percentage
distribution of its load for the methods indicated:
Messenger
Counter
Telephone
Tie-Line
Term-
mating
Origi-
nating
Termi-
pating
Origf:
nating
kla
Termi -
maw
Origi-
nating
nating
.
Origi-
nating
1928
80
. 50
1
26
13
18
6
6
1934
74
50
3
17
9
19
24
24
1940
66 '
40
2
16
15
26
17
18
1946
56,
26
- 3
25
20
- 26
21
23
1950*
25
3
33
17
31
27
31
*February study.
Discounting any
changes in the ratio
of business to social :telegrams.,
it is clear :that the trend is toward terminal handling by wire'-"princi-
pally by teleprinter, telephone, Morse, or facsimile as against the
coetly messenger handling. Because telephone calla cost Money to
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Western Union and often result in handling confirmation of telephoned
telegrams, and, because teleprinters cost more than newly developed
facsimile equipment, Western Union has embarked on a postwar program
to install in large numbers of patrons' offices facsimile equipments
such as the desk-fax earlier mentioned.
Economic Trends.
During the past 20 years, powerful economic forces, realignments,
and developments have had impact upon the rapid record communications
_ -
industry in the United States. Among the more important are rising
price levels, rising labor costs, increased taxation, new direct and
indirect competition, technological advances, and Government regula-
tion.
All these factors, with the possible exception of Government
regulation, have had telling effects, in one way or another, upon
practically all business enterprises. But the high ratio of fixed
plant investment to revenues peculiar to public utility operation,
together with the active interest of State and Federal Government in
that operation, has restricted to some extent the ability of the tele-
graph industry to adjust to changing conditions in the same way, to
the same extent, and with the same rapidity,_ as an unregulated private
enterprise.
44 Those factors were a challenge to management and a hazard to
corporatef-survival. They ultimately led to the inability of the Postal
Tdlegraph Company to Operate at .a profit so that in 1.943it was
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permitted to merge with Western Union. This development leaves
the Western Union practically alone in the domestic record telegram
field.
Fiscal Performance.--Western Union's favorable .earnings in 1950
reversed a trend of losses or slight returns on investment.
The company credits reduction of operating costs as the principal
reason for the upturn. Major factors contributing tothe reduction
are cited as stringent control of expenses, modernized plant, and_
improved operating methOda.
The improvement in operating revenues that began in April 1950
is attributed by the company management to intensified sales effort,
a rationalized rate structure, and later to the increased business
activity that followed the,outbreak.oftighting in Korea. Reductions
in mail delivery also may have had some effect on revenues.
This shift in fiscal performance during 1950 is obviously too
recent to give assurance that the economic problems of the company
have been solved. But there are indications of better financial
weather ahead.
The Board retained a firm of consulting engineers to look into
the future prospects of the telegraph industry. After a customer
survey, the engineers concluded that "the pattern of use of the
various types of .communications in the domestic field has reached a
stable condit1.9n."._ Combining-that finding with economic studies, the
engineers reported to the Board that-there_is likely to be-a-eontinning
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demand for telegraph service and that Western Union should be able
to earn a profit in the near-term future.
In spite of that outlook, there is much to be gained by Government
authorities-i-those responsible for regulation and those interested in
the industry for its national security value-in studying the financial
history and prospects of Western Union. One fact that stands out
immediately is the absence of adequate data on which to base fair
conclusions. Review of the company's difficulties should help to
indicate where those gaps need to be filled, as well as to provide
valuable lessons for the future when new economic problems are en-
countered.
An analysis of rapid record communications in relation to all rapid
domestic communications was made for the Board by Dr. Bonner Brown of
the Stanford Research Institute. He found that total intercity com-
munication revenues (including telephone, telegraph, and air mail)
fluctuated very closely with the country's gross national product,
but that record intercity revenues (of both telegraph and telephone
companies) have lagged behind. He prepared the table on page 113
to illustrate these trends.
Commenting on the trends disclosed.by his analysis, Dr. Brown
declared:
"Both of the series?column 4 and column 5--show a rise in per..
centage in the late 201s, but the rise for record communications is
less, and, consequently, its proportion of the total communications,
revenues had already started to fall. Whether the early 30's saw
th171 culmination of-a growth period, or whether the data Simply reflect
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113.
GROSS NATIONAL PRODUCT AND' DOMESTIC COMMUNICATION REVENUES
1
Gross
Nat'lodu
(Billions).
1926
1927
1928
1929 -
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939-
1940
1941
1942
1943
1944
1945
194-
1947
1948'-
1949
99.5
97,6
99.8
103.8
90.9
75.9
58.3
55.8
64.9
72.2
82.5
90.2
84.7
91.3
101.4
126.4
161.6
194.3
213.7
215.2
211.1
233.3
259.1
255.6
2
Total
Communi.
Ealmalua
(Millions
413
437
482
538
518
474
378
350
361
392
440
460
441
467
497
586
740
915
1010
1127
1118
1161
1286
1347
3
Record
Communi.
__Bayant_aga
(Millions)
k
166
165
174
187
173
150
118
114
121
125
137
140
128
131
135.
- 153
178
204
210
217
204
230
219
211
4 5 6
Percent Percent Percent
Col. 2 of Col. 3 of Col. 3 of
_Qat 1 Col. 1 Col. 2
.41
.17
40.2
.45
.17
37.9
.48
) .17
35.0
.52
.18
34.8
.57
.19
33.5
.62
.20
31.8
.65
.20
31.3
.63
.20
32.7
.56
.19
33.4
.54
.53
.17
.17
32 8
? --------.
31.2
.)1
.16
30.5
.52
.15
29.0
.51
.14
27.0
.49
.13
27.2
.46
.12
26.1
.46
.11
24.0
.47
.10
21.3
.47
.10
20.8
.52 -
.10
19.3
.53
.10
18.3
.50
.10
19.8
.50
.08
17.1
.53
.08
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114.
the effects of cyclical boom and deptession is uncertain, but the
retrogression in the position of record communications stands out.
"Considering that semi-monopolies exist in this field, that
the services included differ and are offered in a multitude of forms,
that rates are subject to control, that subsidies are involved in
some cases, that rates may reflect only 'extra costs 1 of a particu-
lar service, and many other special conditions, the We of total
revenue figures may. appear to be hazardous, but two sets of con-
siderations tend to support the above conclusions. In the first
place, the very regularity of the relationships displayed tends to
suggest that the special conditions are not so controlling as might
be_supposed. Dollarwise, the economy has been able to take just so
mudh communications service, and has gradually changed as to the
dollars spent in different forms. Secondly, any examination of the
physical quantities of the services provided over the years leads
to similar results. Here the lack of complete data and the diffi-
culty of aggregating dissimilar types of services together presents
many problems, but without carrying the analysis as far as is done
in the revenue figures, it is still clear that record communication
is losing out.
In this period of declining relative position, record communi-
cation has had some long-run rise?in dollar revenues. For 1926,
revenues were 166 million dollars, and for 1948 they were 219
million dollars. In the interval, however, prices had risen so the
219 million dollars in 1948 could actually buy a slightly_lower_
ume of geode than the 166 million dollars in. 1926. Record communi-
cation is, therefore, in the position of selling about the same
volume of services as it did in the late 2Ots.
"In a growing economy, the industry that is not keeping in step
has many difficulties. Compared with a growing industry, it is not
so attractive to capital, to managerial ability, to technical skills,--
or to the general run of employees, because it does not appear to
offer the opportunities to be found elsewhere. Little in the way
of new funds will be available, so improvements to lower costs must
come slowly out of depreciation allowances. Refundings of existing
loans meet with resistance. Yet costs and rates must be continually
lowered in real terms (goods, not dollars), in order to match the
growth in productivity taking place in the economy as a whole.
"How much the failure of record communications to keep pace is
due to a simple preference of the public for other forms, and how
much to nonexploitation by record communication companies of potential
demand cannot easily be judged. The consistency of the figures in
thek table suzgeststhat the first cause is predominant, bat there also
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seems to be a general public feeling questioning the efficiency of
telegraph operations. Some improvement in volume could possibly
result from better service and from exploration of untapped sources
_ -
of business,
"The present international situation is one which appears to
assure a high and growing physical volume of business for the nation
as a whole for some years to come. This means communications acti-
vity at a high level, and there is even some indication from the
history of World War II that the relative decline in record communi-
cations revenues is checked in a period of international tension.
Nevertheless, our economy in recent years has been operating close
to capacity, so that physical volume either in business as a whole
or in record communication cannot be expected to increase very rapidly.
Prices are rising, and it is doubtful that they will be kept fully
in check, so that revenues can also rise from rate increases, but it
is to be remembered that rate changes are sluggish and follow price-
level changes only with considerable lag."
Influences on Revenuos.--Trends in the use of rapid communications
services at five-year intervals over a quarter century are shown in
the following carrier revenue figures;
Year 'Air Mail 1/
??????????MIIMIII?NINM???????
Telegraph Op-
erations of
Toll Telephone
Telephone 2/ Goanoanies
(In' thousands)
Landline Op-
erations of
Western Union
1926
$ 996
$ 245,704
$ 15,881
$ 150,112
$ 412,693
1929
4,762
' 345,935
23,918
163,358
537,973
1934
5,316
235,093
17,987
102,557.
360,953
1939
17,656
318,573
20,867
109,899
4-66,995
1944
79,734
,
720,014
36,641
173,207
1,009,596
1949
71,627
5./
1,064,521
.6./
39,135
171,393
1,346,676
1./ Air mail - Includes domestic air-mail letter, card, and parcel
post postage revenue. Until 1949 the portion of domestic air-mail
revenue attributable to parcel post was not available. Estimates for
\1949 indicate it to have been about 4111 million or 15.4% of total 1949
air-mail revenues used in this series.
a/ Toll telephone - Includes public message tolls, private toll line
rOmenue and miscellaneous toll telephone revenue. Data are partially
estimated.
1/ Telegraph operations of telephone companies - Includes TWX, private
line telegraph, and message telegram services. Data are partially
estimated.
Li Western Union and Postal Telegraph - Includes domestic transmission
and non-transmission revenues.
51 Preliminary.
.6./ Preliminary, and based on incomplete coverage.
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The total revenues of the communications industry as a whole,
including air mail, thus in a quarter century increased some 220%.
The absolute increases in the revenues of the components of the
industry in that period are striking: air mail 700%, toll telephone
300%, telegraph operations of telephone companies 110%, land-line
operations of Western Union 14%. The relative percentages of total
revenues enjoyed over the period by the components of the industry
also indicate that the major trend has been away from telegraphic
communication. The figures follow:
..am?mr?????????m?????????????????
Year
Air
Mail 1/*
Toll
"Telephone a/
Telegraph
Operations of
Telephone
Companies 2/
Landline
Operations of
Western Union
(and Postal) L/
1926
.3
59.9
3.8
36.4
1929
.9
64,3
4.4
30.4
1934
1.5
65.1
5.0 .
28.4 .
1939
3.8
68.2
4.5
.23,5. _
1944
7.9
71.3
3.6
17.2
1949
5.3 V
79.1 ?2/
2.9
12.7
*Same footnotes as for previous table
.1??????????????????????????????????????110111????????
Long lines telephone message tolls of the A.T.& T. in 1949
amounted to $439,371,000--something less than half the total toll tele-
plione income of the entire Bell System. Because of its characteristics,
-
however, the long lines message affords illuminatihg comparison with
the, telegraph iessage; when the two are used as criteria the economic
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trends affecting the telegraph industry are again emphasized.
Figures for representative years between 1927 and 1949 were:
Western Union Transmission
Interstate Toll Messa es Messazes
Year 171717-ule Revenues _ Volume
(in thousands)
215,816
234,050
155,215
189,055
232,712
185,673
_I/ Gross revenues (before uncollectible) from telephone message
--
tolls in which the Long Limas Department of the A.T.& T. Co. has
participated. Does not include toll message revenue from calls
handled without Long Lines participation or from private line tele-
phone.
1927$
62,029
35.646
$140,345
?
1929
94,421
49,313
154,435
1934
75,232
37,459
94,653--
1939,
102,896
59,218
98,091
1944
346,884
175,793
158,032
1949
439,371
-225,806
151,740
a/, Number of telepbone messages in which the Long Lines Department
of A.T.& T. has participated. Does not include toll messages handled
without Long Lines participation or from private line telephone.
Attachment III-G, derived from Attachments III-H and shows
:the average revenue per interstate toll telephone message and per
telegraph message.
Rates.--The full-rate telegram, which is the major source of
Western Union's transmission revenues and which is the principal
mAdium,for the business or commercial messages constituting about
75% of the company's message volume, is carried at rates which, in a
tyRical example, compare thus with other means of rapid coMbunications:
;
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Charges between Washington and Chicago
(Federal excise tax excluded)
Ten-word full-rate telegram $ .75
Three-minute TWX telegraph call .95
Three-minute nighttime and Sunday
station-to-station telephone call. '
Three-minute daytime station-to-
station telephone call ????? ? 0 1.40
Three-minute nighttime person-to-
person telephone call 1.55
Three-minute daytime person-to-
person telephone call 1,95
Western Union's present rates incorporate increasos.which were
'granted by the Federal Communications Commission in 1946 and 1947
because the company was then operating at a deficit estimated at
'$12 million for 1946. The Commission's action incltded:
An initial flat over-all increase of 10% in domestic
interstate message rates; Western Union estimated that
,this increase, coupled to other adjustments, would pro--
duce $18.5 million additional annual revenues..
Elimination of certain low "exceptional" or *special?
rates, which would produce anestimated additional
$3.7 million annual revenue.
A flat over-all increase of 20%: in 1947, replacing the
. 1946 increase of 10% 'in the domestic interstate message
rate, It was estimated that this increase would produce
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an additional $8.5 million annually.
Elimination of a 20% preferential rate on certain
Government messages, which would produce an estimated
additional $692,000 per annum.
What influence these rate adjustments may have had on the volume
of transmission business cannot be precisely measured; some effects
are suggested in Attachments and III-K. It appeared
likely that expansion of leased circuits was accelerated. Thus the
total number of Government messages, for example, dropped progressively
from almost 5,5 million in 1946 to less than 2.5 million in 1949,
and the mileage of lines leased from Western Union by the armed
forces rose from the war peak of 1,800 miles in 1944 to 78,000 miles
in the fall of 1950. The leased circuit revenues of the company afford
another indication; these rose from 53.6 million in 1946 to more than
$7.5 million in 1949. Private line teletypewriter revenues of the
Bell System,- which rose from $18.5 million in 190 to $25.5 million
in 1949, and its TWX revenues, which went from $12.9 million 1n
1946 to almost $18- million in-1949, may also havebenefited by diver-
sion of telegram messages.
Excise Taxes.--Early in the second World War, excise takes were
increased to-25% on interstate telegrams and on telephone toll con-
.versations costing over 24 cents. Long-distance telephone communica-
tion has continued to increase, the tax apparently being taken as
aolatter of course. Western Union, averaging estimates, found that
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"it is indicated that an increase in revenues of about $10 million
might be expected from the elimination of the tax," although "there
is no formula by which a precise determination ,can be made as to
the effect of the elimination of this tax upon tho volume of
domestic telegraph traffic."
Air Mail.--Air mail has experienced a long steady increase in
Ik
revenues. This 'growth may have affected Western Union night letter
revenues. Attachment III-B shows that night letter (over night
message) revenues stood at almost $39 million in 1926, dropped to a
little over $19 million in 1933, climbed to over $35.5 million during
the war peak in 1945, and since have fallen to $26.5 million in -1949.
Total air-mail subsidy or deficit payments to airlines for 1950 have
been estimated at $125 million.
Influences on Expenses.--By far the largest share of the tele-
'graph industry's gross income dollar has gone to payments to and for
employees. The trend has been upward. The wage portion of the
income dollar fluctuated between the narrow limits of 54 cents and
60 cents from 1926 through 1944. From 1944 to 1946 it rose from 60
cents to over 72 cents of the income dollar. For 1947, however, it
fell back to 64 cents and for 1948 and 1949 leveled off to about
68 cents.
!? During the same period 1926 to 1949, total Western Union and
Postal landline employees declined from 76,000 In 1926 to 57,000
;inli1938, rose again to 65,000 in 19410 and receded to 41,500 in 1949.
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? Western Union reports that the average weekly earnings of
landline local field employees, excluding-messengers, rose from
$37.99 in 1945 to $62.78 in 1949. Related data from the Department
of Commerce show the following:
May
April
May
April
1949
1950
1949
1950
Average weekly hours
per worker
38.6
38.7
45.2
44.6
Average weekly earnings
$51.84
$53.44
$63.69
$64.13
Average hourly earnings
$ li343
$ 1.381
$ 1.409
$ 1.438
Egia: Tho normal weekday average hourly earnings for both services
are essentially the same, if the overtime rate is eliminated
from these data.
The National War Labor Board on December29, 1945, granted
'Western Union employees wage increases amounting to $31 million in
retroactive pay and $25 million in recurring annual wages.- In its
decision, the Labor Board pointedout that the telegraph industry was
a low-paying industry with an inequitable wage structure, that no
general wage increases had been made by Western Union since those
ordered by the NWLB in 1943, and that over one-third of the adult
employees were receiving less than 55 cents per. hour. One reason for
the fact that no increases were made between 1943 and this NWLB award
,was that the National Labor Relations Board for about a year had been
hating hearings on 'representation. of :Western Union employees,
The sharp increase in wage rates no doubt Was the main stimulus
for the introduction of labor-saving devices in the telograph service.
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One example is automatic reperforator switching which contributed
largely to making possible the reduction in the number of employees
in the postwar period from 57,500 in 1946 to 41-000 in 1949.
reduction of Sorvice.-41osing and reduction of telegraph offices
and agencies of Western Union have.beeri a knotty problem to both
Weatern Union and the Federal Communications Commission since the
merger legislation of 1943.
When the Communications Act was amended to permit merger, Section
214 was also amended to read as-follows:
"No carrier shall discontinue, reduce, or impair service
to a community, or part of a community, unless and,until there
shall first have been obtained from the Commission a certi-
ficate that neither the present nor future public convenience
and necessity will be adversely affected thereby; except that
the Commission may, upon appropriate request being made,
authorize temporary or emergency discontinuance, reduction,
or impairment of service, or partial discontinuance, reduc-
tion, or impairment of service, without regard to the
provisions of this section."
Additionally, Section 214(a) which authorizes the Commission,
after hearing, to require a carrier to extend its lines and to provide
itself with adequate facilities for performing its serviced as a
common carrier, was amended to give the Commission specific authority
to require a carrier "to establish a public office" and to provide
, itself with adequate facilities "for the expeditious and efficient
performance of its service as d Common carrier."
I .
Studies made by Western Union indicate that company-operated
offices and tributary agency offices at Which the message revdnues
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average less than $1,500 a month are operated at a deficit. As of
_ _
January 1950, there wore 1,300 such offices. From the test study,
Western Union estimated that these offices incur_an_annual operating
deficit estimated at over $3.25 million.
The minuteness of the revenues obtained by a large proportion
of the telegraph offices Western Union operates can be seen from
Attachment. III-L. In addition to the 13,000 offices represented
therein, Western Union operates an additional 12,000 agency or com-
mission offices not included in these data.
Attachment III-L-reveals that for the classes shown, .85% of
-
Western Unionte offices (118 communities in numbermith revenues
over $10,000 per month) produce over 71% of its public message revenues.
It also shows that 5.25% of.the company's offices (727 communities in
number with revenues between $1,000 and $9,999 per month) produce
20.79% of its public mesaage revenues. The remaining 93.9% of the
-offices (12,997 in number) produce only 7.57% of the public message
revenue, and 2,045 joint railroad offices (Class 4) reported no
. public message revenue for January 1950,
The President of Western Union in his Report of Annual Meeting of
Stockholders, April 12, 1950, stated: "...While recognizing the neces.1
sity for reasonable governmental regulation of public service companies,
the fact remains that, under present governmental and public service
policies, the company is required to maintain hundicids-of unprofitable
offices."
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On its own motion the Federal Communications Commission adopted
an order on December 30, 1946, providing for an investigation of,
and public hearing on the over-all plans of Western Union, with
respect to the discontinuance, reduction, and impairment of service.
As a result of this investigation, the Federal Communications
Commission established a figure of 46 sent and received messages a
day as a general guide-in determining whether the Commission will
authorize conversion of a company-operated office to a teleprinter
agency office.
At the hearings in this investigation, Western Union represen.
tatives gave testimony and submitted numerous exhibits with respect
to company policy, standards, and plans relating to discontinuance,
' reduction, and impairment of service.
The companyls basic policy, expressed at a previous hearing,_
was reiterated as follows:
was our (Western Union) policy to serve, as far
as we could, within our means, as many people in the
United States as possible; that we must operate as effi-
ciently as we can, first, in the public interest, so
that the telegraph users are not asked to bear unneces-
? sary cost; Secondly, in the interests of the employees;
and thirdly, In the interests of the stockholders."
Western Union representatives testified that three principal
factors made it necessary to reappraise the existing (1947) telegraph
coverages:
"(1) The need for normal postwar contrabtion of facilities
: following expansion made necessary by increased use
_ofrtelegraph during the war;
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"(2) Tho desirability-of changes in the facilities for
accepting and delivering telegraph traffic growing
out of teChnological improvements; ?
"(3) The need of economy and greater efficiency of opera-
tion arising from deficit Operations."
Tho company also told the FCO that "it is not possible to follow
? a mathematical formula in selecting offices for consolidation.---lhe
requirements of the public for telegraph service, volume of traffic,
?- , -
revenue, operating expense, distance from the nearest office, all vary
_
,
so widely that each consolidation must be considered on its own
merits."
Conversion from company-operated offices to agency operation is
not "usually considered by the Company unless the load and revenue
' fit both of two standards." These are: (1) that the average revenue
(collections made from all incoming and outgoing messages) at the par-
ticular office does not exceed approximately $750'por month; and (2)
that the ratio of local operating expense to revenue is 50% or more.
The standards used for determining at which offices hours should
; be reduced are contained in FCC Rules and Regulations for informal
requests for reduction authority. For other situations, formal appli-
cation is submitted to the Commission with a detailed showing of need
so that each case may be judged on its own merits.
4,k
Communications Commission concluded that no general policy could,be
'formulated to govern its consideration of such action.
With respect to closures and reduction of service, the Federal
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In addition to the closing of a large number of duplicate
offices resulting from the merger of Postal with 7estern Union, cur-
tailments since 1947 have been appreciable. During 1947, 1948, 1949,
and the first six months of 1950, Western Union reports, the FCC
authorized a total of 2,324 branch office consolidations, conversionav
and reductions-in office hours, from which annual savings are estimated
to be over 3.1 million.
Interest Charges,--Westerh Union in recent years has been reducing
and adjusting its debt structure in order to save On interost-iiaymonts.
In 1942 the company paid out more than $3.9 million in interest
(chiefly on funded debt). By 1949 these charges had been reduced to
a little over $3.2 million, and in 1949 they were $3.1 million.
Further actions along this line were taken in 1950 by liquidation
of the companyls outstanding $7.8 million of 4.5% funding and real
estate bonds, prepayment of installments on remaining obligations
to the Reconstruction Finance Corporation, and calling for redemption
of $15.3 million of 5% bonds due December 1, 1951. The latter call
was made possible by a $12 million loan from a group of New York banks
at 3:0 interest.
The Current Status of Western Union
The encouragement Of competition in the telegraph field was em-
bodied in the Communications Act of 1934 as a matter of policy. In the
neict year, however, theFederal Communications Commission evidenced
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its doubt of the wisdom of that policy by recommending enactment
of legislation empowering it to authorize and approve consolidations
of telegraph companies. This recommendation was not acted upon.
But as the condition of the telegraph companies worsened, the idea
of consolidation was revived in 1939. The Senate in June of that
year authorized an investigation of the tblegraph industry by a
subcommittee of the Interstate Commerce Committee. No legislation
resulted. In 1943, however, Congress amended the Communications Act
to permit merger of domestic telegraph companies and to permit
ak
Wiestern Union to buy the telephone system's TM( and private line tele-
graph services. Merger of the Postal Telegraph Company with Western
Union followed. The idea of regulated monopoly rather than competition
as a means of strength came to the fore.
Concern for the most effective use of the opportunities offered
by merger then became the keynote. Reporting its decision of Septem-
ber 27, 1943) authorizing the Postal-Western Union consolidation,
the Federal Communications Commission gave expression to it thus:
"We have found that merger may be expected to place the
domestic telegraph industry on a sounder financial basis
than heretofore, and to furnish opportunities for the elimi-
nation of obstacles to improved telegraph service at reasonable
cost to the public; but we cannot pass over the obvious failure
of the management of the proposed merged company to address
itself to any specific plans for meeting the demands of users
for a record communications service having speed and price
34 standards to which the public is entitled and which will effec-
tively meet the competition of the telephone and the airmail.
Attainment of these service objectives, and a generally sound
condition, will require radical modifications in Western Union's
kimanagerial and fiscal policies and practices, and in its
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facilities and operating practices.
"The Commission is seriously concerned with the failure
of the management to direct its plans and aims to such ser-
vice objectives. In the interests of providing a completely
adequate telegraph service in keeping with the technical
accomplishments and public requirements of the present and
of the future, vigilant regulatory action will be necessary.
The Commission will expect that within 1 year from the effec-
tive date of the merger, the merged company will have developed
completely and submitted to the Commission, a comprehensive
plan for converting, within the shortest possible time, its
existing facilities into a modern, efficient, and Nationwide
communications system capable of effectively competing with
other communications services. A continued disposition to
ignore such service objectives will call for such action on
the part of the Commission as may be needful and appropriate
to assure to the public the rapid, efficient, and Nationwide
record communication service with adequate facilities at
reasonable charges which it is the stated duty of the Commis-
sion, under the Communications Act,to make available.
"The future changes in facilities and services available
to the public require special attention. In order to avoid
any future misunderstanding upon this matter, which is vitally
connected with the maintenance of proper service in the domestic
telegraph industry, we deem it important to state before con-
cluding, that we will not sanction any ill-considered elimi-
nation of facilities or services whether or not they are a
result of merger. We will expect that abandonment of facili-
ties, closure of offices, reductions, impairments, or discon-
tinuances of service will be carried_out only pursuant to
considered rational plans in which factors of public need
and convenience will be controlling."
In response to the Commission's request the merged company sub-
mitted on October 7 l944, a "Plan for the Improvement of Telegraph
Service." In general terms the plan mentioned the terminal handling
problem, transmission of messages between telegraph offices) leased
telegraph systems, training program) carrier and reperforator-switching
program, telefax, (facsimile), telemeter, public information, rates,
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research, and railroad contracts. After the war, implementation of
the plan was begun and was pressed to virtual completion by the end
of 1950, some three years in advance of the originaltarget date.
During the postwar years, however, financial problOms -continued to
plague the company and the Commission.
On petition of Western Union in March 1946, the Commission granted
a flat over-all increase of 10% in domestic interstate rates but denied
the requested elimination of the 20% differential on Government messages.
?
Summing up the case in its annual report, the Commission stated:
"It found that fiestern Union was currently operating
at a deficit and anticipated a loss of about $12,000,000
in 1946 if its rates were not raised. The Commission con-
cluded that Western Union would need substantially more
revenue than it requested 'if it is to continue in opera-
tion as a solvent enterprise and provide satisfactory ser-
vice on a comprehensive Nation-wide basis. t It pointed out,
in particular, that Western Union was faced with increasing
competition from telephone and teletypewriter exchange ser-
vices and airmail services, besides being affected by increased
wage costs and reductions in international telegraph rates.
The Commission is not satisfied that the modernization program -
is the answer to Western Union's problems. However, in view
of prevailing economic conditions and Western Unionts dire
need for additional revenue, ?the Commission granted the
rate increase for 1 year pending developments."
In granting the increase, the Commission pointed out that such a
temporary expedient did not meet the basic difficultyi_emphasized the:
need of a comprehensive investigation into all phases of the company's
.-operations,. and sharply criticized the lack of comprehensive and de-
pendable data in the company's_petition-for:the increase. In June the
Cemmission.issued an order:Calling for the .investigation but neted_that
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such aninquiry was beyond the limitations of Cemmission-funds and
personnel and would necessitate a request to Congress for additional
funds.
Before that request could be made, two further actions were taken
frem which betterment of Western Union's financial situation was
expected. Elimination of "exceptional" or "special" city-to-city
and city-to-state rates as discriminatory was ordered in October.
Since these rates were lower than Western Union's standard rates, it
was estimated that their elimination would produce additional revenue
from interstate service of $3.7 million. In December the Commission's
earlier view that the March rate increase of 10% was an expedient only
was substantiated as Western Union petitioned for a further advance
in interstate message rates. After public hearings, the Commission on
December 27 replaced the March increase with a flat 20% increase with
no time limitation.. The effect of this substitution was to increase
current rates by 9.1%0 as against the 15% desired by Western Union.
This rate revision action was estimated to produce $8.5 million addi-
tional annual interstate revenues. In its report on this case the
Commission concluded, in part as follows:
"Western:Union faces a real emergency and the sound
--course for it to follow in the immediate future is not clear-
There is no question, however, about the urgency of Western
Union's need for additional revenues. We are firmly in
agreement with the testimony of Western Unionls president ,
that rate increases are .not the ultimate answer to the
company's situation. -At the present time, however, it
appears that some rate increase may offer immediate revenue
't relief to the cdrapanr. The availability of g Reconstruction
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Finance Corporation loan was characterized by Western Unionts
treasurer at tan anchor to windward, which may be of some
help in the immediate -situation.' Further general rate ---
increases by Western. Union will, of course, worsen its
position in relation to the competitive means of communica-
tion provided by the telephone companies and the airmail,
and may fall short of meeting the company's revenue
needs."
Seeking an appropriation of $375,000 to conduct the. investigation
proposed in its June 1946 order, the Commission in testimony before
the House ,Interstate Commerce Committee on February 25, 1947, expressed
doubt "whether the modernization program proposed by Western Union,
or any program which can be devised can save Western Union and if
so, whether it can be put in operation in time;" stressed the need
for determination of national policy; and explained that, broadly
speaking,
alternative policy solutions are apparent. If a
comprehensive record communications system is not a necessary
part of our national economy, then nature may be permitted
to take its course with respect to the disposition of Western
Union's facilities. If such a system is necessary, but need
not be independent, then consideration may be given to the
possibilities that the telegraph system may be consolidated
with either the telephone industry or the post office. If
it is determined that an independent, record communications
vstem is necessary, then the whole issue resolves itself -
into the means by which this is to be accomplished and the
issue of subsidy is involved.
"A fifth possibility would permit Western Union to con-
centrate its business only between cities with large volumes
of traffic--to skim the cream of traffic--abandoning all
other communities, but this would be far from the 'nationwide...
communication service with adequate facilities' enjoined by
the Communications Act."
The req'uested appropriation was not granted. During the period
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since the hearings, the 80th (1947-1948) and the 81st (1949-1950)
Congresses made studies of the communications problems of the country,
including the domestic telegraph situation, but neither enacted
legislation pertinent here. the modernization program of Western
Union was expedited, and the company's management took a more aggres?
sive leadership.- Rounding out the modernization effort a program
?vas announced by the company in 1949 including:
(1) Installation and operation Of new high-speed message centers
in Detroit, Los Angeles, and New Orleans.
(2) Installation of hundreds of desk-fax (facsimile) machines
in customers' offices in eight major cities.
(3) Installation and expansion of private telegraph networks
for large industrial_ users.
-(4) Continued operation (made possible through legislation
exempting them from the wage and hour provisions of the Fair
Labor Standards Act) of 12,500 telegraph agencies.
(5) Consolidation of major operating departments of the company
for greater operating efficiency and economy, and the establishment
,p
ora separate sales and advertising division.
(6) Further reduction of the company's debt.
The company went into broader matters in a special report issued
in october,19491 proposing the adoption of a coordinated national
communications policy and advocating substantial Changes in the tale-
-commAnications industry. The report recommended:
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(1) Repeal of the 25% Federal excise tax.
(2) Purchase by Western Union of the teletypewriter exchange
service (TWX) and telegraph services of the telephone company.
(3) Legislative permission for purchase by Western Union of
the cable and radio facilities of American companies operating
in the international field.
_(4) Provision by Western Union-of an integrated system of
domestic communications geared to military requirements and
available in normal times to the public and the Government.
.(5) Long-term Government financing, as may be necessary to
achieve the above objectives.
Negotiations were carried on in1943-1945 between Western Union
and the A.T.& T. ,looking toward the acquisition of TWX and allied
services by Western Union under the permisPive legislation of 1943,
but without result. Resumed late,in .1949, they had not been con-
cluded at the time of this report. On July 1, 1948, Western Union,
the A.T.& To, and certain companies of the Bell System had entered a
contractual agreement in which Western Union would sell and transfer
to the Bell System its public telephone business and property for
$2.4 million cash and the public message telegram business of the
Pacific Telephone and Telegraph Company and a subsidiary. This agree-
ment was subject to approval of the FOG, and of state or other regula-
tory agencies.
k Accordingly, a joint application was filed with the FCC on
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February 1, 1949, for certificates under Sections 214 and 221(a) of
the Communications Act of 1934 as amended. In late 1949 and early
1950, an FCC examiner held hearings, during which two state commis-
sioners sat as representatives of the National Association of Railroad
and Utilities Commissioners. These hearings resulted in an order
for the issuance of a certificate, which in effect approved the appli-
cation.
However, on September 8, 1950, the Chief of the Common Carrier
Bureau of the FCC exceptedto the initial decision on the grounds that
the acquisition of the telephone facilities of Western Union by the
Bell System companies under the proposed conditions would deprive
? Western Union subscribers of "personalized service and of the advan-
tages of an auxiliary Or standby service," and wculd require them "to
pay higher charges for their message toll telephone service." As for
the discontinuance of -public message telegram service by the Pacific
companies, the Bureau excepted to the decision on the grounds that
the service proposed to be provided by Western Union would generally
be less stable in character than the service rendered by Pacific, that
speed of service on a large percentage of traffic would be adversely
affected, and that "the proposed transaction will result in the eli-
mination of all competition between Western Union and the Pacific
08mpanies in the offering of message telegram service." The Bureau
submitted that an order should be entered denying the joint application.
k Also on September 8, 1950, on behalf of the Attorney General of
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the United States, exceptions were submitted to the Examiner's
findings, conclusions, and initial decision.
The applicants have filed a reply brief to the exceptions, but
the FCC decision had not been rendered at the time of this report.
April 1950 saw a reversal of the decline in Western Union's
operating revenues. The modernization program, rigid economies, im-
proved operating methods, and greater sales efforts are regarded by
the management as the company actions which contributed to the change,
and rate adjustments, the Korean situation, and increased general
business activity as the salient non-company factors. Commenting
on the upturn, the Federal Communications Commission in a report dated
August 31, 1950, to Senator McFarland of the Committee on Interstate
and Foreign Commerce said in part:
"The Western Union Telegraph Company has reported a net
income of $2,687,000 before Federal income taxes for the first
six months of 1950. Assuming that revenues and expenses will
continue at the March through June level (Western Union re-
ported net losses in January and February), Western Union may
realize a net income of $7,000,000 for 1950 as compared with
an assumed loss of $5,000,000 in the above-mentioned report.
The principal reason for the difference in assumptions is the
substantial savings that the company has been able to effect,
principally through force reductions as a result of the com-
pany's mechanization and economy programs. Landline expenses
in the first six months of 1950 wore $7,578,000 less than the
same period of 1949 of which $6,312 000 represented savings
in labor-expenses.
"Assuming that Western Union will be able to maintain its
earnings in 1951 at the level assumed for 1950, and after
adjusting for the sale of buildings subsequent to the date
of our earlier letter and further assuming that the once
suggested cut in/Federal excise taxes on telegrams will not
-materialize, Western Union maybe expected to have cash
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'balances an December 31, 1950 and 1951 of $34.4 million and
$22.6 million respectively If the -application now pending
before the Commission for authority to sell the former Postal
Telegraph Company's toll telephone system to the Dell System
companies should be approved by the Commission, the cash
balance for 1951 would be increased by $2.4 million.
Western Union's improved financial situation bolsters
the Commission's conclusions...that the Commission 'would
prefer to give Western Union a further opportunity to ex-
tricate itself from its financial' difficulties, rather than
to propose the enactment of drastic legislation at this time
which might result in, or lead to, Government ownership or _.
operation of Western Union, or which might result in one
huge monopoly of practically the entire communications in-
dustry of the United States.!"
Summary
? The over-all national demand for telegraph facilities and services,
as well as for telephone and air mail services, has been growing
almost steadily since 1926. ,During that period, however, the relative
demand for tclegram service has lessened. This shift in the character
of the demand for telegraph service has seriously threatened the
continued existence of the Western Union system as a private enterprise.
Remedial measures applied by the company and by regulatory authority
in recent years, following a longer period of Government concern over
the prospects of the industry, resulted in a return to profitable -
operation in April 1950. The long-range prospect is indeterminate.
Domesac Telecommunication Systems
of the Federal Government
Federal Government agencies during the year 1949 operated nation-
,
widttleaSed 'wire teletype networks, the size of which is indicated by
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the following estimated figures:
Miles of leased teletype wire,
including weather services
Miles of leased teletype wire,
325,931
excluding weather services
167,824
Cost of leased wire,
including weather services.
?
? 8,053,877
Cost of leased wire,
excluding weather services
$ 3,501,796
Originated words transmitted,
including weather services. ?
?
16,347,342,986
Originated words transmitted,
excluding weather services. ?
?
5,835,071,689
A more detailed presentation of these estimated figures appears
in Attachment III-M.
No attempt has been made in this study to include any statistics
concerning extensive telephonic communications of the Federal Govern-
ment agencies, the bulk of attention being devoted to statistics
relating to wire record communications, largely teletype. Such
commercial message statistics as were available, however, are included.
Domestic radio communications such as aeronautical mobile, mili-
tary land-mobile, radar, etc., are considered to have no particular
significance in this study and therefore have been excluded. No
figures embracing costs of operation (other than the costs of leasing
facilities and equipment)are shown. The development of such figures
was considered to be too great a study to make in the time available.
This was because many agencies do not keep adequate cost records.
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A brief description of the agency operations 1i6ied-inAttachment
III-M follows:
Department of Agriculture.--The Department of Agriculture leased
17,630 miles of teletype network during 1949. .0f this total, 15,835.
miles were primarily usedto transmit market news and related informa-
tion for national dissemination to the public by radio broadcast and
newspapers. Among the other functions of the Department utilizing
leased teletype facilities is the service offered in connection with
the foot and mouth disease program.
Department of Commerce.--Two agencies in the Department of Commerce,
the Civil Aeronautics Administration and the Weather Bureau, have ex-
tensive domestic wire networks totaling 115,659 miles. Attachment
shows these two agencies separately and further divides the CAA com-
munications data into two categories, "weather" and "other than
weather." Communications involved in weather flight control, weather
forecast, and operational 'weather control some of which are leased
telephone lines have been included under the caption "weather." General
administration, air traffic control, and communications operation are
Included under the caption "other than weather."
The Weather Bureaunetwork, operating separately although in con-
nection with CAA carries weather data used exclusively in weather .
,
'reloorts and forecasting.
The Weather Bureau, like theAir Force and CAA, uses symbols
which are not generally available in commercial telegraph operation.
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To translate such weather data for transmission by commercial tole-
graph service would increase the wordage by-approximately 40%.
Department of Defense.--The Departments of the Army, Navy, and
Air Force operate individual wire networks throughout the continental
United States which total 149,529 miles, primarily for the conduct
of rapid recerd communications between military establishments or
between military establishments and other appropriate points in the
nation.
Though communications originated by other agencies of the Govern-
ment are transmitted over the facilities of the defense establishment
to the degree indicated in Attachment such transmissions are
made under the general assumption that no additional facilities or
personnel will be required.. There is also some interchange of messages
originated by the 3 military services for transmission over each otherts
networks.
the Air Force networks accommodate weather, facsimile weather maps,
military flight service, aircraft control and warning system, and
military air transport services. They also serve some needs of the
Departments of the Army and Navy, and all 3 of the defense departments
'make use of the weather services of the Department of Commerce .(CAA
and Weather Bureau).
'4 As in the case of the CAA, the Air Force statistics have been
shown in two parts, "weather" and "other than weather." Again, as in
th6 case of the CAA, the weather wordage figures have been excluded
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from the grand total of leased line words because they embrace
special forms of transmission involving special teletype symbols
and telephonic wordage.
General Services Administrzl:tion.--The General Services Administra-
tion (GSA) operates a leased wire teletype network totaling 14,392
mileb, supplemented by TWX service for Government agencies, for the
year 1949.
This service, available to all Government agencies, operates
from 8:00 A.M. to 11:00 P.M., E.S.T., Mondays through Fridays, and
offers direct message service between 54 major U. S. cities, in addi-
tion to the possibility of refile via other media to other U. S. cities,
or to foreign countries.
Pickup and delivery are done by telephone (with mail confirmation),
messenger, or by local teletype line when and if the message volume
warrants. The Administration estimates that, by acting as a clearing
house for Government domestic rapid communications, it reduces domestic
telegraph costs to the Government 35% to 40%. The cost of this ser-
vice, exclusive of overhead, is prorated to the users on the basis of
the cost of the facilities.
Veterans' Administration.--The Veterans' Administration maintains
a leased wire network of 8,658 miles-, supplementing the leased facili-
tidb of other Government agencies, to connect its offices in every
State for the conduct, of its business. West of the Mississippi River,
it Wes a great amount.of.TWI service.
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Other Federal Government_Agencies.--Certain other agencies
(listed by footnote in Attachment while free to use facili-
ties maintained by GSA, also lease teletype wire lines or otherwise
contribute to the total figures, as indicated in the Attachment.
The degree of radio transmission involved in the figures pre
sented for "Other Federal Government Agencies" is negligible, being
for the most part the result of secondary operation, as in the case
of the FCC and Department of Justice, which use radio frequencies for
emergency purposes when wire lines fail, or to the few points that
normally are not served by wire.
Trends in Federal Government Use of Communications
The policy of using military systems for the 'transmission of
record communications of the Federal Government, agencies is one of
longstanding. The volume of Government messages, both military and
non-military, gradually increased, and the military systems were ex-
panded. Domestic radio circuits within the continental limits were
introduced around-the year 1921, These, however, were not oompre-
- _
hensive enough to fUrnish-service to all points in the United States,
'and the Federal agencies, including the militaryvrelied in great
measure upon the domestic commercial companies for service.
Thera was a gradual transition, starting in 1930, in which Wire
cii4cuits leased from commercial companies replaced radio circuits for
the tranimission of Government domestic messages. This transition was
theitnatural outcome or the knowledge that radio frequencies could be
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employed to better advantage in overseas cemmtnicatips. At present
the-ruse of radio frequencies for domestic communication has been
reduced to almost nothing.
Commercial landline rates for Government messages were fixed
in 1886, under the authority of the Post Roads Act at 40% of the__
existing commercial rates. From that time on, the commercial opera-
ting companies made continued efforts to have Government rates
equalized. Finally, by a gradual process whibh started in 1935,
Government message rates and public rates were equalized in 1947.
As Government rates rose and volume increased, Federal agencies
turned more and more to the use of leased wire lines. The saving
from leased line operation roughly approximates the increased cost
that would have resulted from the equalized rates, given the same
volume.
The use of leased wire lines by Federal Government agencies be-
came so extensive that the Public Buildings Administration (later
transferred to the General Services Administration) was authorized in',
_
1946 to coordinate leased line operations and to provide moans of
raising the efficiency of such operations.
At the present time the GSA has made some progress toward the
more efficient use of lines leased by the Federal-Government:-
A strong influence which has accelerated the leasing of teletype
'wires by Federal Government agencies is their cost advantage over
mtssage service, given sufficient volume of messages between specific
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points. The two main sources of leased teletype wires are the
A.T.& T. and the Western Union Telegraph Company.
Loginlation.--Public Law #413, 79th Congress, approved June 14,
1946, gave the Public Buildings Administration authority (with certain
restrictions) tri) operate iyublic utility services, including tele-
communications, serving one or more Government agencies.
Public Law #1520 East Congress, approved June 30, 1949, trans-
? ferred this authority to the General Services Administration.
In addition, this later law gives broad powers to the GSA in the
? operation and management of public utility services for the conveni-
ence and economy of the Government. GSA claims power under this law
to eliminate or consolidate leases of communication circuits operated
? by various Federal Government agencies.
Interrelation.--Interrolationships between Federal Government
systems are not particularly complicated and continue to incline toward
a "community" system of operation wherein messages originated by one
agency may, by arrangement, be transmitted over the facilities con-
trolled by ope of the others.
Relationships between Government systems and domestic commercial
systems are more complicated. All of the Federal Government networks
depend upon the commercial companies for wires and maintenance, and,
in some cases, for equipment.
Generally, all of the Federal agencies that have communications
operations rely upon the commercial domestic organizations to round
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46.&
out their systems, either by telegram service or TWX. This Itrounding
out? takes the form of deliveries to desired cities or points to
which the Federal Government systems do not extend. The Government
in almost all cases carries the message as far as possible over its
own system.
The Government's domestic teletype systems are estimated to have
transmitted in 1949 (excluding weather data) more than 5.8 billion
words. Government payments to the A.T.& T. and Western Union for the
facilities used in these transmissions were roughly $3.5 million,
of which $1.4 million was paid to Western Union. An additional 04.5
million was paid for facilities used predominantly for the transmission
of weather data amounting to the equivalent of roughly 11 billion
words.
What it costs the-Government to operate its domestic leased
facilities, and what is saved through leasing facilities rather than
paying regular message transmission charges is not actually known.
However, an approximation of these charges over commercial circuits
.can be estimated through the use of-calculations made by the GSA in
a study for 1949 based upon about 28 million words transmitted domes-
tically. GSA estimated that the Government saved 38.6 per cent by
using leased wires, the percentage of saving being based on the assump-
tAn that -charges for commercial message service would average over
. 6 cents per word. This assumption indica-tea that the GSA calculations
areitbased on the straight day message rate for telegram service.
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Western Union reports the average cost, including all rate categories,
to be about 5 cents per word. At this average cost per word, the
percentage of saving, adjusted from the GSA estimate, would be 32.1
per cent.
Summarized estimates for the year 1949, using the Western Union.
average cost figure of 5 cents per word and the savings percentage
. adjusted from the GSA estimate, follow:
Federal Government Leased Wire Overations.,
Excluding Weather Data
Rental of facilities $ 3,501,796-
_
Total words transmitted 5,835,071,689
Cost at 5 cents per-word $ 291,753,584
Saving by use of leased lines indicated
by 32.1% saving adjusted from :GSA estimate. $_-93,652,900_.
Resultant estimated cost of Federal Govern-
ment operation of leased facilities . . # $ 1980100,684
We have not attempted to determine whether it is necessary for
the Federal Government to tranSmit almost 6 billion- words yearly for
its domestic business. .
Other Domestic Telecommunications Systems
There are a great number of rapid telecommunications -systems
within the United States Other than those which have been described
s(
above. These systems include networks interconnecting broadcast and
television stations; airline and railroad telecommunications systems;
A
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marine telecommunications on the Great Lakes, rivors, and harbors;
land mobile services (autos, trains, trucks); press association net-
works; private wire networks of large corporations; and the amateur
radio networks. Many of these systems are nationwide and collectively
they interconnect all of our major cities anctmost of-the-minor ones -
many times over.- These networks are mainly dependent upon the physical
facilities provided by the American Telephone and Telegraph Company
or Western Union', and during the year 1949 spent some $50 million for
_
leased line service.
In addition to those systems within the continental United States,
Alaska, Hawaii, and Puerto Rico all maintain domestic telecommunications
'systems which serve their particular areas.
A brief description of the most important of these
follows.
Networks Interconnecting Broadcast and Television Stations
The broadcast industry uses extensive telephone facilities
the transmission of programa to stations, and teletype circuits
systems
for
for
planning and coordination of network operations. In 1948, 3 regional
-,wdp
networ16, 4 nationwide networks, and 11 key stations spent $1 million
for wire services. A total. of 1,824 other standard broadcasting
stations paid $5.8 million for like services. FCC reports indicate
that the commercial broadcasting industry spent in 1949 in excess of
_ 2,/ Estimate made from statistics supplied by A4.& T. Western Union,
and PCO Reports,
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$15 million for interstate private line services. Television broad-
'tasting has necessitated construction of extensive coaxial cables and
microwave links, the use of which increased considerably 'during 1949
;NIA
and 1950..
Airline Domestic Telecommunication Systems
Scheduled airlines lease extensive telephone and teletype networks
for use in their domestic operations. Some 500 aeronautical ground
ntations were served in 1949 at an approximate cost of $6 minion,
divided as follows:
A T & T
Teletypewriter Exchange Service
$ ?73,000
Private Line Telephone
$ 1,400,000
Private Line Telegraph
$ 3,500,000
Western Union
Private Line Telegraph
Telegram Tolls
$ 629,000
$ 336,000
-
Growth in the use of leased private line services by the commercial
airlines is shown by the following figures from the Long Lines Depart-
ment of Ailrae T4
rear EUMBILtar2 Year ELLTalitEn2
.
13g . $ 69,000 1945
. 1,8,000
1.9,g : 2,919,000
. $ 1,190,000
. 582,000 . 4,225,000
1942.
Railroad Telecommunication Systems
During the year 1949, Class I railroads (gross revenues over
$1 million) had it service'522,000 miIes of telegraph wire, 873,000
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miles of telephone wire, and 215,000 miles of pole lino. Thin tole-
-
communication network, which extends throughout the nation following
the railroad lino, is used for train dispatching, matters relating
to passengers and freight, and various other formslef company business.
Employees chargeable to the railroad communication service totaled
39,121 and their yearly compensation was $145,248,935.
Domestic Wiro Networks of the Press Associations
The Associated Press; United Press, International News Service,
and Transradio News Service 'operate large national teletype networks
for the distribution of news. The collective cost of these leased
circuits for the year 1949 was $450,000.
Domestic Systems of Large Corporations
A number of the large. corporations in the United States, especially
those-Aia have nationwide interests and branch offices, maintain
their own domestic leased wire teletype systems. Corporations such
as United States Steel, General Motors, Ford Motor Company, and General
Electric, and many smaller ones, have volumes of domestic telecommuni-
cations that enable them to lease and operate wire systems on a
national 'basis and to effect appreciable savings in costs by comparison
with telephone toll rates and domestic telegraph message rates. It
is estimated that from 20% to 40% can be saved by private line teletyPe
heration, depending upon volume, under current Western Union Message
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On the Great Lakes and Rivers
On the Great Lakes, the Mississippi River, and connecting inland
waterways, communication is carried on between ships and between ship
and shore by radiotelephone. Certain shore stations have 4 "public
coastal service" which will permit calls from ships to be completed
through landline connections. Operational messages are also relayed
or forwarded as requested by the company or captain. Charges for
this service are regulated by law, and established long distance rates
apply on shore connections. Revenues as reported by the Class A and B
telephone carriers in 1948 for such services were $575,000 on a basis
of 400,000 calls.
Land Mobile Telecommunication Services
? These services provide communication between mobile stations and
base stations which tie in with public landline telephone facilities.
The telephone companies in many locations operate the base stations.
In general, trucking firms and automotive emergency road services make
extensive use of such systems. A.T.& T. revenues from this service
totaled.$1.6 million in 1948 on 1.4 million calls handled.
Taxicabs are making extensive use on a nationwide basis of very
high frequency radiotelephone for dispatching. In 1949 radio was used
? in nearly 3,000 separate taxicab communication systems covering about
14,000 mobile units.
Xn Hawaii
The 6 islands of the Territory of Hawaii are provided with telephone
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and telegraph service by the Mutual Telephone Company. Long distance
operation betWoen the islands is made possible through operation of
multi-channel radio microwave equipment incorporating the further
use of radio dialing and radioteletype. Mutual also furnishes coastal
harbor and mobile radiotelephone service in Honolulu. Assets of the
company totaled $23.5 million in 1949, with operating revenues of
$7.5 million. The net earnings were $829,000 after Federal and Terri-
torial taxes of $974,000. Plant equipment consisted of 280,000 miles
of wire, 95% in cable. Telephones in service were 90,000 or 17 phones
per 100 population in the islands.. EMployses totaled 1,400 with
compensation of $4.3 million.
In Puerto Rico
Telephone communications on the Island of Puerto Rico (population
245 million) are operated by the Puerto Rico Telephone Company, a
subsidiary of the International Telephone and Telegraph Company.
While earnings have declined steadily, the Company has been able
to install over the last 5 years 19,000 telephones, a net gain of
12,000. This was made possible by the policy of the International
Telephone and Telegraph Corporation, the principal stockholder, which
has received no dividends since October 1944, yet has permitted its
subsidiary, International Standard Electric Corporation, to advance
equipment and materials worth $3 million.
.--:AlliS':company's rates have not been increased for over 22 years, and
Ail. the meantime all casts of doing business, have materially increased,
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151.
Several petitions for incroases in rates have boon filed, and the
company hns filed a motion tor temporary relief to help it continuo__
to give satisfactory service, and to permit small additions to plaht
equipment pending the approval of a new rate schedule.
Present plant investment approximates $9 million, with other
current assets of about $1 million. Total operating revenues in 1949
were $2.5 million with net earnings of 254,000 after tax deductions
but before interest charges of ??196,000. Thirty-five thousand tele-
phones were in service and the company had 80,000 miles of wire, 90%
of which was in cable. Componsation-to 675 employees was $965,000 in
1948.
In Alaska
Alaska, with an estimated population in 1947 of 92,000, is pro-
vided with telecommunication facilities by the Alaska Communications
System (ACS), a branch of the U. S. Army Signal Corps. Since its
authorization by act of Congress in 1900, the system has operated the
only longline communication channels within the. Territory and between
the Territory and the United States. The AGS now has 32-telecommUnica-
tion stations serving the Federal and Territorial Government agencies,
and the general public, by wire and radio. The latter includes service
to and from ships at sea, press sei'vices to newspapers, broadcast pro-
gAms to radio stations, and general commercial messages. Regular
telephone service is provided in the larger cities by 14 exchanges
with a total of approximately 12,000 telephones in service; In 1948
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152.
the telegraph service provided by ACS to 58 Government agencies had
an estimated commercial value of $480,000 and military telegraph
messages of $3 million. Telephone service to the agencies approximated
$54,000 and that to the military $173,000.
Supplementing the ACS, mainly to serve isolated communities, is
a 60-station radiotelephone system maintained by the Alaska Communica-
tions Commission, an agency of the Territorial Government, The Alaska
Native Service also operates a total of 102 radiotelephone stations,
the majority of which are located in Aa-ctic and sub-Arctic regions.
The statibns are used to conduct the routine business of the service,
as well as for emergency purposes.
The Civil Aeronautics Administration maintains an extensive net-
work of 42 radio stations, operated by 625 employees, used primarily
for aircraft navigation and for weather information. Routine weather
reports from outlying stations are also relayed to a common point for
forwarding. The CAA is also the largest Government agency user ot
Alaaka Communications System facilities,, receiving services valued
:at $80,000 in 1948 and $76,000 in 1949.
Recent Trends,
The outstanding trend apparent in the development of the doMestic
systems described in this section is that of relatively rapid and sub-
stantial growth. For example, the broadcasting industry served 12
. million homes with 618 radio stations in 1930. In 1949 it served
424tlillion,hotes-with 3,067-radio stations. The aviation industry in
US12_11 CIILD.
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153.
1930 maintained 170 ground radio stations and 293 aircraft stations.
.In 1949, 1,572 radio transmitters were licensed tolcommercial air-
craft operating with 1,409 ground radio stations.
The growth of television has increased the estimated tangible
investment in stations and sots from a 1948 total of $403 million to
more than $3 billion at_the end of 1950. In 1947 there were only
12 stations serving 210,000 receivers. In January of 1951 (Oven
though no new television station construction permits were issued.
after September 1948), a total of 107 stations were serving an esti-
mated 10.6 million receivers. From Omaha east there are 47 inter-
connected cities having 80 television stations serving 9 million
receivers. Of the total stations, New York has 7, with Chicago and
Washington 4 each. Sixteen other non-interconnected cities have
27 stations serving 1.6 million receivers. These figures indicate
that about 40% of the homes in TV areas now have receivers. During
the month of December 1950 alone 704,000 were placed in use. Los
Angeles' 7 stations placed that city first in estimated television
investment.
The accelerated growth of television has hastened the construction
of coaxial cables, bringing the nationts total to 7,600 miles in 1949. -
This over-all program has been modified somewhat because of planned
Astallation of microwave radio relay systems between various cities.
Conclusions
A 1. The telephone_system of the United States is a financially
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154.
sound, multi-hi-lion dollar industry consisting of the Bell System and
5,000 independent companies. This coordinated system is providing
the nation with what is admittedly the best telephone service in the
world. It is steadily improving that service by aggressive technolo-
gical advancement. In view of the healthy condition of the telephone
system, we conclude that no changes in Government procedure for in-
suring adequate service in the national interest are necessary.
2. The telegraph system of the United States has experienced
economic difficulties owed in part to the expansion of other means of
rapid communication. The recent return of the principal telegraph
company to profitable operation, in part because of improved management
and modernization of its plant and in part because of greater general
business activity, is encouraging. This current improvement in the
position of the industry affords an opportunity to develop information
needed for sound, long-range planning to avoid future difficulties.
We believe that sound management and vigorous technological development
can contribute further to the stability of the domestic telegraph system.
3. The effects of the administration of the Communications Act
of. 1934 relative to reductions of telegraph service through the closing
of unprofitable offices or through substitution of agencies need further_
study. Western Union maintains that the restrictive application or
present legal provisions places an undue financial burden upon the-com-
pany which it can ill afford to bear; representatives of labor contend
.-that too great a degradation of service often has followed the
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155.
substitution of agencies for offices.
4.1. Rates for the telegraphic services--telegram, TWX, and private
leased lines--are given regulatory approval without adequate know-
ledge of the costs of providing such services. Also?-in passing upon
long-distance telephone rates, the Federal Communications Commission
should inform itself of the probable effect of proposed changes upon
the position of the telegraph industry, and upon rates for local tele-
phone service.-
5. We have looked carefully into the proposal that our telecom-
munications industry should be divided clearly into two parts, one
dealing exclusively with "record" communications, the other with
communications by "voice. Our examination of this question has shown
that such a dividing line is very difficult to draw, and we have con-
cluded that the attempt to reorganize our telecommunications system
on the basis of such a distinction might result in effects on the
system going far beyond the initial intention of any such division.
The main bone of contention today is the fact that the telephone company
offers a form of re9ord communications--TWX and private-line leases--
which competes with message-delivery functions of the telegraph
company. We note that Congress in 1943 amended the Cothmunications Act
to permit acquisition of this form of service by the telegraph carrier.
This the companies involved are free to negotiate an agreement to maks
this change, subjact-to approval by the FCC. We believe that this
matter should be determined by the normal processes of negotiation.
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156,
6, The operation of leased domestic telecommunications net-
works by the Federal Government for the transmission of Federal
Government measages is not, strictly speaking, competitive with
the operations of commercial telecommunications companies. In
its teletype networks, the Government is taking advantage of volume _
rates offered by the telecommunications companies in the same manner
as can any other customer with large volume requirements. The
Government should continue to take. full advantage of the most
efficient and economical rates and conditions of service which
are available to any large user. While it is important that the
Government seek the moSt economical means of handling its own
Communications, it also is of great importance that it continue
its present policy of using privately owned-facilities-.rather than
building up Government-owned competing network.
. _
* * * * *
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BELL SYSTZT SELECTED STATISTICS
!ARATIVE DATA FOR ALL T1MEO1TE CARR/ERS
c. 33. : Dec. 31 : Dec. 31 : Dec. 31:
* ? 1 1 4o 14
87
7
0 : 17
Attachment III-.A
Dec. 31 :All Carriers -23e1,1
1 :Dec. 1 ? S stem
81:
9: 3
89.: 7,052: 7137 :
5=-8777E-
$,22z 19,3
28,212: 7,454: 399,81p 420,009: 483,777:
16,000: 47.639,000: 54,339,000: 60.759.000: 81,865,000:
77,000: 26,425,000: 30,307,000: 33,966,000: 44.813.000:
1 000: 4 62 000: 4 660 000: 0 4 000: 6 411 000:
2 ,000: 78.
?
?
?
$9,30.L000: 99,154000:133.089,000:1 7
58,768:
? ?
?
300,000: 90.3
?
?
?
?
?
23,823:
25,077:
(7
o)
(i)
co
(..)
0
0
K3
0
000: 0 20 000: ? 0 000: 90,5 83000:1 2 02 000:1 0,0001000: 82.5 "
1 2 ?
18 90: ? $5202....45/: 33
19,11 : '41,17 ,322: $1,910,889: $2,893,271:$ 30.80,000? 301_8
. 0 ....._5_.2.jm2310.910,000 87.7
?
00:
$
,*1 268, 4: 2 01: 42-11.527: 513?..,g6g: - - : 5
: , 5: 10,902: 83.8971_, 82 4 g: - - i3
$l1,7j,$ 914o7: f 1814,770: $ 399,91?5 0
-o
03
4=?
os pairs. When carrier is used the maximum capacity of an open wire pair (5
spacity of two cable pairs is 12 telephone channels. 0
.D.
)ne channels. op
op
tiles. X
0
many and Bell Telephone Laboratories. 0
0
Ilephones as of June 30, 1950)
0
0
.0
0
0
0
co
P.C.P. a. Ais
Mester& Wan and Postal Telegraph (Landline)
Umber of Transmission Messageshy Class of Message
1926_19149
. (Thousands)
A EL ac e
0
6926
7
5
29
31
SD30
6933
PPP
CD
136
37
3g
35
43
39
44
114g
II
lUll Sur
MOY-4'
setter
Eight Letter
and Night
Message
Serials
Total
Public
Messages
Govern-
mint
'Press
Money
Orders
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
132.47?
17.724
36.784
-
155,950
6,522
17,952
4,077
131,153
15,344
37,355
-
156,555
6.651
15,145
4,102
135,318
19,900
37.745
-
192.966
7.655
19,678
4.272
138,6141
22,260
353,851
199.752
8,159
21,287
4,852
123,535
106.797
21.897
20,414
33,659
27,515
-
550
179,091
155.279
8,806
8,993
19,417
15,054
4.gg
, 4,
80,342
16,612
19,921
2,556
119,431
5.725
11,675
75.007
15,463
19.205
4.903
120.551
5,916
10,999
2,564
81,269
19,563
19,875
7.908
128,615
9,763
12,065
3,079
57,575
20,811
20,124
7.7g
1,287
7.656
14.749
3,414
93,605
22,249
20,019
9,3
1L$5,2142
5,075
.14,542
3,757
92.279
19,590
23,043
9.267
114)4,179
8,495
14,279
4,207
55.190
15,574
19,641
5,550
131,955
8,622
11,788
4,003
87,811
18,641
19,661
9.086
135.199
7.645
11,400
3.892
93.512
lo5, o
15.631
13,917
20,220
22,736
8,580
5,608
138.243
150,951
5.882
5,751
11.143
11,288
4.072
5.269
113,2142
11,o57
25,126
6,723
156,748
13,040
8,361
8,609
118,286
16,883
30,544
5.909
171,622
15,453
7,401
13,359
116.926
15,791
33,0156
6,531
172,334
12,743
8,484
15,898
123.537
15,949
35.75
7,156
182,220
10,593
9,903
15,748
124,945
13.362
32,1401
5.924
176,632
5,474
10,104
11,192
134,733
12.309
31,405
8.050
186,497
3.107
11.596
8,512
117,748
10,087
29,181
7,967
164,983
2,799
12,254
5,577
108.014
9,281
264511
7.670
151,476
2,422
11.638
8,308
Timed
Wire
(9)
-
_
3
li3
1.693
2,607
3,474
3.389
2.900
3,109
4,093
6,003
8.603
9282i
-
-
-.
-
_,'
tweet-
trigs
'3,145143,075
Cable
and
_Radio/
.
Other
Irene-
mission
Messages 3J
.
Grand.
Total
(10)
t- (1)
(12)
(13)
217,531
215,516
-
224,571
234,050
211,971
23.373
143.553
-
155,215
2,117
4,356
5,064
176,250
5,714
h,693
4,766
193,566
15,013
6,403
4,746
200,711
16.360
5.678
4.333
185,639
17,534
6,175
4,095
159,055
18.766
5,504
3,642
151,645
22,329
6,174
3.163
210.928
l8, 00
5.783
3,704
223,145
9.
9,033
4,242
231,692
9,623
9.614
4.016
232.712
11.627
10.698
3,840
244,629
3,832
9,656
3,814
220.704
9.852
4,523
224.0E7
-
8.897
4,365
201,378
-
7.998
3,531
155,673
s4
ATimed wire service discontinued in February 1943 by order of the commission and a new service, Longrams end Serial Longrams, was introduced. CD
CD The number of Longrem messages was included with day letters, serial longrame with serials. Longman and serial longrams were discontinued CD
-.%
04 in 1946. CD Cable and radio messages represents the domestic haul of international traffic handled by Western Union and Postel.Telegraph. Data not 0
0
I available 1926-1934 CD
35g Other transmission messages include Commercial News department, cortract (principally railroad) messages and facsimile. Data not available 1926 - 19347'
tprcest For the period 1926 to 1934, irclusive, the data are based on responses from The Western Union Telegraph Co:1-pany (landline s-tin) and the Posta?
-.%
Telegraph Company to Telegraph Division Order No. 12. Data for sulseauent years are based on annual renorts to the Commission. For the years
1930 - 1936 Postal Telegraph data were reported for the month of January only; annual data were estimated on the basis of .the relationship of January
trensmiesion revenues to the transmission revenues for the year.
Source: Rt 5.9 6
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M111
.?FMM
r ?
u.r4
WMWOM
MM N0%.12
CAW
Cs?
HH
wAWDEA
t1S61.-.W11150
? ? ? ?
WaliVA
kift
OH %DB
g
PAP.3 RIM Ilag
1,1?-1 1114
trIAP,t(Ai
411.
AEA -gra6 UM Van' WM
;.E46".4?" nNR-z tn..
. "Ma 11B4NS r r
111 11111
411.
um -mu, gelI.
4.1f.41'A pAAVAI.,
111 141ae aUg1 11111
? moor Soft
N101M011.11 MICA?
irr.TRA Nwog 6mAIN unt
? I. t 1.11%// 1.1?
44A tro,o r4
is e
teLvd..4?.? ?DA ? SA 4%A
n.g.k141A MEIS
a e. IS ?
Apita' w.moitmcg NNNNN C4Np4rIrI .4N74AA
4111.
urs van purg wpm mg.3
ma,
?tett taste ,?aa tON
MR arqAt fgM Him mal
AAA Ate.4w4 4W444 4Aur,t7:4 p4tO.41Zr:
r4 r4
411
A-Ift
UN
g? MIREto os'RI
gIR=TA briR=I
Mtrlin
WWW
CO 4011-
OltPdACR raiR?"1
? ? ? ? 0.000
ON UN1/40 to 0 150
r4 ri H N r4
4,28na
dict.4.61 112.: ?
HI-11-1
al5.1 .glwo DIUR
Obi" esatd. ?????? ? ?
nmalm
Ern?
.1.1,4 r4 r4 r4 r4 r4 r4 r4 ri r4 r4 .4 ri r4 r4 r4 r4 r4 r4 r4
I
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Pc.Pe.
?
Western Union and Postal Telegraph (Landline):
: Composition of Nontransmission Revenues '
1949
:
(Thousands of dollars)
? Money
Code Errand Order
Reeittration Service .Ch4rges
(4) (5) (6)
Leariail
Tear ctrt
1927 $2,143
1928 2,072
1929 2,338
.1930 2,324
1931 2,228
1932 2,269
1933 2,301
1934 2,194
1935 2,227
1936 2,342
1937 2,426
1938 2,500
1939 2,631
1940 2,615
1941 3,524
1942 4,292
. 1943 3,689
1944 3,655
1945 3,572
1946 3,681
1947 4,319
1948 5,696
1949 7,528
Measured
Serv4ce
(2)
{
Other
Leased
- Plant
1
0
0-
50
0
V V
ch cow
es r4 e4 r4 r4 e4 r4 ?
?
260
240
^ 220
? 200
?cr
9 180
?cr
co
to .??^ ???
Ce :
Ci wiCs
(7) 44 :1 140
a 5
.4. a.
0 a a
120
o
CD
CD 100
CV
? 80
0
15
ce
60
13
O 40
0
0.
a. 20
0
Attachment 21r ILL -
Interstate Toll Telephone Messages of the A. T. & T. \
and Western Union (including Postal) Tranamission Telegraph Messages ? \
. 1927 - 1949
\ \
t
I
c....
.6
4
?4416.
,..?
. :d
...
..
)'
?
?
I
? ? .'"
e
e
...............
...?,
?
?
Western
Telegraph
Union
?mnami.sioa
Messages
i
f
,
?
so-
Telephone
-state
Toll
Wessages
/
IInte
/
'1
I
t
Sr
?
I
?
,e
. ?
.?
.
.
.
.. . .....
.....
.s . ..
.-..0 ......
..-
;.r."-
_-.'?
. .-
......? ...'"
-"-----...----
"----
Note:
from
Lines
Gross Revenues (Before uncolleztibliiI---
telephone message tolls in which
Department of the A.T.&T,Co. have
Does not include toll message
calls handled without Long Lines
or,frommrivate line telephone.
the
partit_
revenue
partici-
Long
.
1
oipated.
from
_ _cation
r4N to)
PI VI tot
at at at
o-I el e4
\
VI t? o,
Oo
^ r4 r4
A e4
cr)
o. o.
e4 et el r-I r4
V V
a cw
r4 r4
ssusiolift=fitgel)
0
?
=ea fres ?slog:mph Operations of Image Telephone 0oipanies
? 1926-19119
Attachment
,Private Private -vat e Private
-Private ]ins line Private line . line
line tele- tele- line tele- tele-
o? Tear Teta Morse t..awriter ?boto h X Other? Tier Totald Morse typewriter photograph TVX Otherlf
ICT) 4.1=r1TrITTirtNirrr1 (Percent of tote].)
0
8 '1926 $16,o $ - 0 $ - 3.926 100.0 - ... .o
? 1927 16.016 - - 0 ..,1927 100.0 - - - .0
g 1928 21,057 - 0 _ 1928 100.0 - _ .0
N- 1929 25.197 - 0 1929 100.0 - .0
0 0
0 0
0 1930 27,0311 ,.. 0 - 1930 100.0 - . .0 c)
ce 1931 25,252
co - - -
514 . 1951 100.0 - -
'II/ - Ce
co
CD 1 2.1
932 21,793 . - - 1952 100.0 - - - - co
1 2.933 21,018 ... - 1933 100.0 - - 4.7 - ?zr
'-' 19p 21,407 -9 - 1934 100.0 - - Wei - 0
. . c?
.1 .1
00 1935 20,684 6,836 9.575 46o 3,813 .. 1935 100.0 33a0 Iii.:16;: 2.3 18.4
op
9, 1936 24,166 7.201 10,733 467 5,645 120 1936 100.0 29.8 1.9 23.4 .5 0.
:4
3.937 26,238 6,961 11,592
lig 64792 353 ,1937 100.0 26.6 44.2 1.6 25.9 1.5 0
"r 1138 23.963 5,1493 1(4755 6,824 397 1938 100.0 22.9 44.9 2.1 26.5 1.6 Ce
ci
cX 1939 23,804 11,911 10,455 480 MO 439 1939 100.0 19.5 h3.9 2.0 32.7 1.9-
0 -
1940 23,344 3,630 10,326 '471 ? 8,440 4771940 100.0 156 44.2 2.0 g.2 2.0
:
1941 25.320 2,672 11,282 473 10.183 510 1941 100.0 11.3 44.6 1.9 .2 2.0
CD
1, 2,206 16,466 474 16,255 1 ' 1942 100.0 6.1 45.8 1.4 45.2 1.5
1942 5,
1` 1rg 1, 15,724 422 23,485 ' 1943 100.0 3.2 3sal 14 ?;.:75 ' 1:1
.C4 1 41,693 1, 15.826 366 20,642 458 1944 100.0 3.4 45.1 .9
o
o 111.2
c?i 1 4o,s1s 1.539 21,573 366 16,827 513 1 loo.0 ...11 52.9
54.4 .9
w 1 34,065 1,5o8 18,537 550 12,963 5o5/
1947 loo.o 3.6
1 100.0 1.6 38.1
U) 194 35,376 1,285 19,601 776 13,757 4 54.6 2.2 38.3
(c'D3 1948 41,830 1,081 22,766 1,162 16,323 478 1948 100.0 2.6 5164 2.8 39.0
15 1949 46,219 879 25,562 1,369 17,965 444 1949 100.0. 1.9 55.3 3.0 38.9
ce 4
411,
'
1.2
1.5
1.3
1.2
0.9
s- ? s-
O 1/ Boreal:les differ from those shown for toll telugraph opermtione of :telephone compmies in-rfabice primarily due to inclusion of r,:ivenua 0
U- for local telegraphServine and revenue of othir companies in addition to those of the Bell Syetam, Cincinn-,ti Subarbr.n 3e11 Teleahone U-
13 Company and Southern Mew England Telephone Company. 13
W w
> lf Coverage of total revenue figures: >
O 1 1926-1930 - Private line revenues of 8ill System. Cincinnati Suburban Bell Telephone Company and. Southern :Irew 3.aleannd Tele7,11one Conn...ay. 0
s- s-
O. 1931-1934 - Private line and TWX revenue of Bell %rater', Cincinnati Suburban Bell .eleDlione Company, -,:aci Soulern :el: Th1. 1 ;la 2,,lonlIonc
_ 0_
o_ Compsny. O.
cXcX
19354949 -Bell oad other Class A and B carriers reportinG to .PCC.,
?
Includes message teleGram service mud miscellmneous private mud non-privmte line revenue.
Lost than 0.1 per cent. ,
Somme:. Responses of Bell System Telephone Companies to Telecraph Division Order ro. 12 and 'annuel reports of Clres A and B 2c1eallone Carriers
twthelteders1 Communications Commission.
,
Sp-Azeri_fsas
5
INC VitS111104 UNiON MAGI APN COMPANY
LAND LINE SYSTEM
Attachment -"Ile .7:1Z- 1-
DISTAJBUTION OF OFFICES AND PUBLIC MESSAGE REVENUE
ACCORDING TO CLASS OF OFFICE
AND AMOUNT OF PUBLIC MESSAGE REVENUE REPORTED IN JANUARY 1950
NUMB(R
DIASTR I BUTION OF NUMBER OF OFFICES
PEICZNT
TO TOTAL.
1.190 8.60
727 525
118 .85
59
11,748
13.542
.43
84.87
"
AGENCY OFFICES REPORTING REVENUES
II
' WESTERN UNION MAIN OFFICES [CLASS
Reporting Public Message Revenue as ,nd.cated:
Less than 11.000 per month
DISTRIBUTION Or PUBLIC MESSAGE REVENUE
AMOUNT IP"Gt kir
TO TOTAL
$10,000 or more per month
DIRECT TO ACCOUNTING CENTERS [CLASS 9A]
ii
JOINT RAILROAD OFFICES [CLASS 41
s 550,513 in
2069.100 20.79
7.130.018 71.64
8,862 .09
194.588 1.95
$ 9.95.108i 100.00
100 90 80 70 60 50 40 30 20 10 putc.ENT 10 20 30 40 50 60 70
Note: Revsnus as shown for main offices comprehends revenues for the main offices themselves. their branch offices and agency offices
apart from those Class 9A agency offices reporting revenues direct is Accounting Centers which oft shttt sePowltelY chowe?
80
90 100
CIA-RDP84-00499R000700100001-8
..zregrowcziratt:AL--)-
STATISTICS -1949
DOMESTIC CONTINENTAL UNITED STATES FEDERAL GOVERNMENT AGENCY OPERATION
OF LEASED WIRE TELETYPE LINES - ESTIMATED AVERAGE FIGURES
ATTACH"- .277 _ZrZ- pf
(11EziSLO=OgO73LA
(REVISED 1/3/51)
1 " --rtr
0 Jr
O FEDERAL GOVERNMENT AGENCY
0 ,
0 1
.,.
MILES OF
LEASED LINES
I
COST OF
LEASED LINES
AND
EQUIPMENT
It
ESTIMATED
ORIGINATED (I)
WORDS
TRANSMITTED
III
NUMBER
WORDS HANDLED
FOR OTHER GOV-
ERNMENT AGENCES
IV
ANNUAL
COST
T W X
SERVICE
V
NUMBER WORDS
TRANSMITTED
VIA
WESTERN UNION
vi
ANNuA T-
kosT
OF YeDS
TRANSMIDED VIA
WESTERN:ONION
vig
0
0 ,
ep-r. OF AGRICULTURE
17,630
$ 244,036
45,705,272
NONE
$ 2,400
1%.
0
5,4 I 2,3671$ 1 4,03 I
?Et, OF THE AIR FORCE (WEATHER)
80,497
2,905,958
(2)
(2)
NONE
NONE NalE
WT. OF THE AIR FORCE (OTHER THAN WEATHER)
33,000
588,000
460,000,000
6,000,000
70,028
(3) 14943
rEPT. OF THE ARMY '
23,4 23
429,958
330,81.6,6A
43, 500,000
162,326
(3) \ 52_1080
ttPT OF COMMERCE (CIVIL AERONAUTICS ADMIN-WEATHER
77,6 I 0
1,646,123
(5
1 0,587,9 60,000
4,31 7,800,000
I 00,000,00 0
(2)
25,000
NONE
NONE
' 600
55,280
NONE NOgE
li----
47;400 :woo
4,450,866 19 II& 75 1
' WT. OF COMMERCE (CIVIL AERON. ADMIN)- OTHER THAr WEATHER
3 1,770
6,279
695,772
1 16,280
ifrE OF COMMERCE (WEATHER BUREAU) .
GLENERAL SERVICES ADMINISTRATION
14,392
246,088
4,88 2,0 34
(6)
23,762,639
29,228
Ct
7,0 63,564 166.31 I
DEPT QF THE NAVY .
1 2,609
446,1 57
373,697,0 1 6
(8)
254,760
66,840
(3) 1116699
iikTERANIS ADMINISTRATION
-121-HER
8,658
225,000
38,729,040
270,000
125,536
-cf-
9,215,080 I I 6Q9 I 2
(9)
FEDERAL GOVERNMENT AGENCIES
20,063
p I 0, 505
87,753,000
1,876,304
311,795
7,8 6 I, 38 2 25 CE6 33
gpTALS
325,931
$ 8,053,877
16,347,34 2,9 8 6
75,688,703
$ 824,033
34,050,659 $ 1,7 1 t1760
ppTALS LESS WEATHER FIGURES
167,824
$ 3,50 I ,796
5,759,3 82,9 8 6
75,688,703
$ 824,033
34,050,659 $ 1,7 1 060
AND TOTAL LEASED LINE WORA)
1
5,835,071 ,689
w
to
(I) FIGURES SHOWN DO NOT INCLUDE RELAYED WORDS.
(2) NO ESTIMATE MADE BECAUSE OF THE SPECIALIZED NATURE OF THE SERVICES
AND FORMS OF TRANSMISSION.
(3) FIGURES NOT AVAILABLE.
(4) THESE FIGURES REFLECT SOME TRANSMISSION BY RADIO, EXACT PERCENTAGE NOT
AVAILABLE.
(5) THIS FIGURE NOT REFLECTED IN TOTALS BECAUSE OF SPECIALIZED NATURE
OF SERVICES AND FORMS OF TRANSMISSION.
(6) INDICATES NUMBER OF WORDS TRANSMITTED ON A PRORATE BASIS, UNDER
AUTHORITY OF PUBLIC LAW 413 (SEC. 7) 79TH CONGRESS, APPROVED JUNE 14,1946.
(7) DOES NOT INCLUDE WEATHER TRANSMISSIONS, BUT OTHERWISE INCLUDES WORDS
TOTALED IN COLUMNS III AND 1St.
(8) SHOWN FOR WASHINGTON AREA ONLY - OTHER FIGURES NOT AVAILABLE.
(9) OTHER FEDERAL GOVERNMENT AGENCIES, WHICH ARE REFLECTED IN THESE FIGURES'
FEDERAL COMMUNICATIONS COMMISSION
DEPARTMENT OF THE INTERIOR
DEPARTMENT OF STATE
DEPARTMENT OF THE TREASURY
MEDIATION AND CONCILIATION SERVICES
EXPORT - IMPORT BANK
FEDERAL POWER COMMISSION
NATIONAL MEDIATION BOARD
HOUSING EXPEDITER
UNITED STATES GOVERNMENT PRINTING OFFICE
UNITED STATES TARIFF COMMISSION
INTERSTATE COMMERCE COMMISSION
RECONSTRUCTION FINANCE CORPORATION
FEDERAL RESERVE SYSTEM
DEPARTMENT OF JUSTICE
ATOMIC ENERGY COMMISSION
CIVIL AERONAUTICS BOARD
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CHAPTER IV
UNITEDSTATES TELECOMMUNICATIONS ABROAD
Electrical communications that rival the domestic systems in
speed connect the United States with points all over the world.
Commercial networks span the globe with messages, conversations, and
pictures that give direction to the nationls foreign trade. Interna-
tional radio facilities built up by the Federal Government handle a
heavy volume of communications for the conduct of defense and diplomacy.
Long-range broadcasting under the supervision of the Department of_State--
is one of the countryts essential international activities under current
world conditions. Commercial and government interests participate in
operation of international telecommunications for protection of life
at sea and in the air.
All but the cable, systems are directly concerned with the demand
for radio frequencies discussed in Chapter II of this report. Another
problem affecting international telecommunications of the United States
arises from economic and other difficulties of the companies engaged
in cable and radiotelegraph service.
The,py.ble companies have been burdened with a heavy investment in
plant. IntenS'e competition with each other and from radio has held
down profits. Development of radio in the international field has
added circuits faster than traffic has grown. The American companies
often have found themselves at a disadvantage in negotiations with
the monopolies of government-controlled companies of other countries.
k
The result has been an intermittent demand for legislation that
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would permit the merger of some or all of the Americhn companies
selling cable and radiotelegraph services.
Many agencies of the Government from time to time have supported
the merger idea,, but for the most part Congressional policy has been
opposed to such action. The Communications Act of 1934 calls for a
competitive structure *among the international record communication
companies. Officials with a primary responsibility fOr_national
security are eager that as many international circuits as possible
--- are kept in operation.
To supplement other information available on the economics of
the merger .question, the President's Communications Policy Board
re-
tamed the engineering firm of Ford, Bacon & Davis to make a special
survey of the record communications industry. These consultants
found that, while savings from merger in the international field might
make possible reductions in rates, of a group of big customers of
the cable and radiotelegraph companies most were opposed to consoli-
dations on-the ground that poorer service might result. The engineers
concluded, moreover, that the companies now have good chances pf
operating at a profit.
The staff of the Board, in its over-all study of United Statee
overseas telecommunications, has amassed a great deal of statistical
infoAation about the international telecommunications networks, both
government and non-government. Although this information has been
tabulated and a substantial amount of it analyzed, the analysis of
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the government networks has n9t been completed.
Much of the information relating to overseas telecommunications
of the Federal Government has to do with operations of the armed
dk
forces. When the President on December 16, 1950, proclaimed a
state of national emergency, the Board decided that security re-
(
quirements would prevent inclusion of material of this nature in a
public report. The material therefore was classified and remains
in the files of the Board.
Development of Commercial Systems
Cables
American companies entered the international communications
field in 1$81 when a cable was laid between Canso, Nova Scotia,
and Penzance, England, and leased to the Western Union Telegraph'
Company for operation.
British companies already had been operating across the
Atlantic for some time and later pioneered also in service to
Latin American countries and across the Pacific. In the Atlantic
service, a British monopoly prevented companies of other countries
from landing their lines at Newfoundland and it became necessary
for companies wishing relays there to lease lines from the British
interests.
*4 Operation of the transoceanic cables originally involved re-
laying messages manually at stations located at several points
aloft the cable route. In. 1898 cable relays were developed to
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Permit automatic Operation. Because of the characteristics of
.cable transmission, however, direct service was not possible
over, long routes that involved several relays. In 1921 regenerators
wore developed to allow operation of cable circuits direct from the United
-.States to Europe, thus speeding up the service and decreasing the cost
of operation.
Another improvement came in 1923 when, in order to increase:
its traffic-carrying capacity, the Commercial Cable Company0.an
, American organization, laid a line with a copper conductor double
the SiZO of previous conductors. The following year the Bell
System announced development of a high permeability alloy and
Western Union laid a cable in which the conductormas wrapped with
-
tape made of the new "permalloy." This cable has a capacity in
excess of 300 words a minute, while the Commercial company's 1923
line has a capacity of 200 words a minute and the capacity of the
_
_- -
earlier cables is much lower*
Deecriptions of the 'American cable systems in operation
today are included in the discussion of the "4gendmip'Outlopk
for U. S. Cable. and Radiotelegraph Companies."
-Laaidelegraph
,
'Transeeeanic-Communication by radio was established on a
11.rm basis prior to World War I, aftermest-earlier-attempts had
. _ -
Met With only sporadic Success because of. lack of efficient
4
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transmitting and receiving equipment. One reason for this
situation was that each equipment manufacturer did not have
available patented devices controlled by others. As a result,
United States radio-communication oompanies had confined their
operations primarily to ship-shore service.
Upon the American declaration of war in 1917, the U. S.
Navy assumed operation of all of the countryt s high-powered
stations built for transoceanic communication. Under its war-
time control, the Government combined the patents and scientific
resources of all electrical manufacturers. These included use of
the Alexanderson alternator and the DeForest tube, which offered
a solution to the problem of efficiently generating and receiving
?_
continuous-electrical waves. By the combining of various other
inventions, new devices were developed out of whiCh came practical
radio transmitters and receivers satisfactory for wartime purposes.
'Thus the Navy carried on transoceanic communications during the
:war, with powerful stations on the Atlantic and Pacific coasts
, Operating on low frequencies .(long waves).
After the war, the Government fostered the organization of the
Radio Corporation ot America -(RCA) in 1919 to solVe-the7patenttangle e.66L-
:-Iceep American radio communications free.at-foreign control. Prior to ita
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162.
incorporation, an attempt to obtain exclusive rights to the
Alexandorson generator had been made by the British Marconi Company
and negotiations with General Electric had been practically completed
wheE-the Navy Department indicated its objection to the ownership of
_
this and other American radio patents by a foreign interest. As soon
as RCA was organized it purchased the assets and patent rights held
by the American Marconi Company controlled by British interests. In
1920, RCA entered into exclusive cross-licensing agreements whereby
it obtained rights to the use of other important patents, including
the DeForest tube.
With these rights, the company quickly established direct radior
telegraph circuits to England, Hawaii, Japan, Norway, France, and
Germany. Service was inaugurated to Italy in 1921 and two years later
to Poland. After the advent of long-distance high-frequency trans-
- - --
missions in 1927, circuits were established to Java,. French Indo-China,
..??????????--
' the Philippines, and Hong Kong.
As these services grew, RCA established two subsidiaries--
Radiomarine Corporation of America and RCA Communications, Inc. (RCAC)
.-to conduct the business which previously had been operated by
company departments. RAC confines its operations largely to point-to-
point service between land stations, and Radiomftrtno hftndles service
to and from ships almost exclusively. By 1939 RCAC had establiohed.
52 international radiotelegraph circuits, and by 1950 it was operating
69 such circuits.
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After World War I, other.radiotelegraph carriers also became
active in the international field. By 1926 the Tropical Radio
Telegraph Company had established 12 direct radiotelegraph
circuits to the West Indies, Central America, and South America,
and by 1950 the number had grown to 24.
The International Telephone and Telegraph Company in 1929
acquired the Postal Telegraph and Cable Corporation and, from its
international division, organized the Mackay Radio 4 Telegraph Company
to challenge RCACIs monopoly in the worldwide radiotelegraph service.
By 1933 Mackay had established 10 circuits and in 1950 had 35 in
operation.
Government policy was to grant transoceanic frequencies orAy
on a public utility basis, and not for private use. As a result,'
the Robert Dollar Steamship Company organized Globe Wireless, Ltd.,
:and the Firestone Tirs& Rubber Company created the United States-
Liberia Radio Corporation to meet their special requirements,
al-
though the facilities were made available to any. customers. .Those,
systems and that of the South Porto Rico SugarCompany ,offer
'public service Only to a limited number of points.
When the Federal Communications Commission was organized in
1934, its initial practice was to deny applications for circuits
tOoduntrieb already served by other American radiotelegraph carriers.
.With the 'outbreak of World aar 11 in 1990, howeveri.the-Commission generally
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164.
? granted applications for new circuits, regardless of whether other
carriers already were operating to the points concerned.
In January 1942, the Defense Communications Board (later
succeeded by the Board of War Communications) adopted as a wartime
measure a policy encouraging establishment of parallel circuits from
the United States to overseas points, to be operated by two American
companies. Where possible, different locations were to be used in the
? country with which parallel circuits were set up. In April of that
year, the policy was amended so that, if parallel circuits could not
be established because of lack of suitable equipment, every effort
would be made to establish duplicate circuits to allow two or more
American companies to communicate with the same point abroad.
Under these policies, the Mackay company established circuits
- to Russia, Italy, Eire, and Greenland between 1939 and 1942 and after
, that time set up communications with 12more countries.
Press Radio.--The value of international radio communication
l'ic)r the expeditious handling of news was recognized early IV American
press associations and newspapers.
Soon after Marconi's original experiments, the New York Herald,
_
set up a radio station in Now York Harbor to gather news from ships
at sea and to 'send out daily now summaries to them. This station
continued In operation until World War I. -After the war, the New York -7
iie edtablished its tadi.station to communicate with European stations,
_
- ? '
and Noon thereafter similar facilities were installed by the
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Associated Press, the International News Service, and the Chicago
Tribune.
As the demand for frequencies grew, the Federal Radio Commission
in 1929 entered an order calling for the formation of asingle publie
utility to servo all the American press. This action led to the
-
organiiation of Press Wireless, Inc. Although it was established to
serve the press exclusively, the companyls charter does not limit
holding of stock to press interests, and its corporate powers extend
to and include the operation of fixed public service as a commun-
ications common carrier. By 1936 Press Wireless had established six
international radiotelegraph circuits, and in 1950 was operating 17
such circuits. In addition to its special services for individual
newspapers and press associations, the company handles multiple-
addressed press material and program and radiophoto services.
40,12.1aleRhone 4
Experiments in the field of radiotelephony were begun in 1915
by the United States Government in conjunction, with the American
Telephone' and Telegraph Company, Messages were sent from the naval
,station at Arlington, Va., and from Washington to such distant points
as San Francisco, Honolulu, and Paris. Interrupted by World War It
tests were continued after the war. .
,
Speech was transmitted to England in 1923, and by the end of
1926 successful test operations were being conducted between New York
Juld.tondonns firstirlternationa1 radiotelephone circuit :for
_ - . .
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general use was established between those cities by :LT.& T. in
January 1927. Soon afterward service was extended beyond the
-terminals of the radio circuit, by means of wire lines, to all of
Groat Britain and the United States. Cuba and a part of Canada
were added for service by the end of 1927 and the following year-:
- service was extended to many countries of Western Europe, utilizing
the extensive wire telephone network connecting London with the
Continent.
By the end of 1933 transatlantic service was in operation for
most of North America and the principal countries of Western Europe.
Ten direct radiotelephone circuits had been established. In certain
cases, a direct circuit was provided to a distant terminal; in many
others, the establishment of direct service with several countries
was provided on a so-called "forked" circuit basis; in still others,
either of these two types of radio channels was used in connection
with line wire extensions to countries beyond the distant radio
circuit terminals.
-
Overseas circuits radiating from the United States.were centered,
at three main focal points: New York, Miami, and San Francisco. By
,1936 the A.T.teT. had established 27 direot radiotelephone circuits.
..Fifty-sevon such cirouits, were in operation in 1950.-
The Radio Corporation of Porto Rico also engages in, limited
international radiotelephone service, Operating the San Juan terminal
of thej.A.T.& T circuit between the UnitedAState6 and Puerto Rice.
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The Honolulu end of the U.S.-Hawaii radiotelephone circuit is
167.
operated by the Mutual Telephone Company of Hawaii. Its radiotele-
phone transmitters and receivers in turn are operated by RCAC under
_
a lease agreement with the Mutual company.
Bagaiglion of Commer2ial_gystems
Under' the Communications Act of1934, as amended the Federal
Communications Commission is charged with regulating, among other
things, international communications by telephone and telegraph,
whether wire, ocean cable, or radlobroadoast and other forms of radio
servibes.' These functions do not, however, include control .of facil-
itios operated by the Federal Government.
Among the provisions of the Act are those affecting common carriers
and reflecting-Congressional policy that the public interest in
adequate public communications service and reasonable rates is-to be
protected and promoted by Federal regulation.
The Commission's responsibilities in the International common.
carrier field require it to be active -in the area of foreign relations
as they pertain,toAhat field.
, The United States is a member of the International Telecommunications
- Union. As such it participates in the negotiations stemming from the
Union that relate to international telephone and telegraph questions.
Additionally, there are other bilateral and multilateral agreements
on the subject in which the United States is concerned. Because the
Commission has large responsibilities in the field as indicated above,
it must be alert to the effects of such international negotiations
-
upon the public interesl, convenience and necessity as related to
? s-
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non-Federal Government international communications.
Among the regulatory interests of the Federal Communications
Commission in this field are merger, circuit arrangements, frequency
management, equipment and operating techniques, processing of appli-
cations, conference preparation and negotiation, rate schedules,
acceptance and delivery practices distribution of traffic, records,
and finance
One significant matter (Docket, No. 8777) has been pending for some
time,. This case grew out of applications involving the question of
whether and to what extent the Commission will authorize a second direct
radiotelegraph circuit to countries already served directly by one
carrier. This question contains many facets rolating,to,morger, frequency
? utilization, national defense, and competition between American carriers.
Adequate regulation,- however,- has been somewhat hampered in recent
years because of budgetary limitations. ,
Development of U. S. Government Systems
Apart from the facilities established during World War I and-some
minor syStems operated between the wars_to maintainLcommunication with
:overseas'military.bases, 'ships at soai and aircraft over the sea, the
United States Government had not developed any extensive international
communication facilities of its own until the beginning of World War I/.
Responding to the requirements of global operations, the Army
(including.the Air Force) and the Navy then created new worldwide
netiaorks for communications. Certain non-military agencies of the
Government also established more limited systems. In the early years
of the war, these agencies leased some commercial radio and cable
facilities until they could install their own equipment and operate
it. Certain of these leased facilities, however, were continued
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throughout the war period and some of them are still in leased use
today.
Many of the overseas facilities installed by the Government for
war use also have been continued in operation. Some of course were
abandoned, but the postwar international situation has required-re-
tention of many facilities which otherwise might have been curtailed
or eliminated, as well as the installation of additional ones.
De artment of Defense
Following unification of the armed forces in 1947, a Joint
CommuniCations-Electronics Committee was established-as an agency of
the Joint Chiefs of Staff in the Department of Defense to coordinate
-telecommunications activities of the several services and to provide
liaison with Government departments and with other public and private
agencies having interests in the field. As a result of the committee's
-work, the Department of DePense has established principles for the
integration of telecommunications functions among commands and
services.
As the General Services Administration has managerial respon-
sibilities for Government telecommunications services specified under
Public Law 152, the GSA and the Department of Defense have agreed on
areas of understanding on the procurement of telecommunications
facilities in order "to obfain the maximum economy consistent with
the requirements of service."
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U. S. Army.--Before the turn of the century, the Army was
devoting attention to wireless telegraphy with a view to adapting
it for military purposes. These tests led to the installation of
four radio stations in 1900 and within the next eight years the
Army was operating 17 stations in the United States.-Alaska, Cuba.
and the Philippines, plus radio stations on five Army transports.
By the time of the United States entry into World War I, the
Army radio network had expanded to 51 stations in the United States
and 10 overseas, and 53 Army vessels also had been equipped with
radio.
The Army radio net was officially organized in January 1922,
In June of that year, 218,000 words were handled over this system.
Because of budgetary difficulties, the Army's use of telecommunication
facilities grew little until the limited national emergency was
declared by the President in 1939. At that time, the Army radio not
connected Washington with the Corps Area Headquarters in the United
States and its overseas Department Headquarters such as the Philip-
pines, Hawaii, Puerto Rico, and Panama. This net then handled about
5,000 ssages a day.
During the early months of World War II, the Army leaned heavily
upon the commercial facilities of Western Union, Mackay, A.T.& T., 'and
RCAC. But commercial facilities did not completely fill the bill.
Direct circuits and greater security were required. In the cireum-
stadces, the Army and the Air Corps drew plans to build worldwide
communications to serve the armed forces.,
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The plan comprehended a "pipe-line" around the world. The
first leg put in on the "pipe-line" was from Washington to Asmara,
Eritrea, on a multi-channel teleprinter basis. By early 1943 an
around-the-world belt line had been completed, extending from Asmara
to .New Delhi, from New Delhi to Brisbane from Brisbane to San
Francitbo, and thence on to Washington. The network's message volume
reached 50,000 a day in March 1943.
Before V-E day, the Army Communications Service had been extended
into an unprecedented global system, employing the most modern equip-
ment and operating techniques known to U. S. telecommunications _
experts, and providing instant communications to all overseas forces
and missions and allied countries. By January 1,1949, this network
had been contracted and rearranged, but 14 overseas trunk circuits
were still in operation, The Army, in addition, utilizes the services
of the international carriers to locations where it has not been
necessary to establish Army facilities. The Army also 'handles radio
traffic for some of the other Government agencies when spare circuit
capacity is available.
ga_g4
j.--Radio communications on an operating basis were
established by the U. S. Navy as early as 1903 for the purpose of
communicating rapidly between ship and shore and between ships.
Later, radio communication facilities also were provided between
shore establishments both at home and abroad. As the Navy grew and
the communications art developed, the Navy's communication system
became larger and more complex.
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Before 1940 the Navy operated several point-to-point
multi-
station radio telegraph circuits and one Morse wire circuit within
the continental United States. In 1941, however, the Morse circuit
was converted to piivate teletypewriter operation. This conversion
marked the commencement of the transition from radio to landlino
for intracontinental circuits.
Today, with the far-flung interests and missions of the Navy,
its communication system meets the requirements for essential con-
tinuous, and immediate communication between Navy air, surface, and
sub-surface operating forces wherever they may be and between those
forces and Navy shore establishments.
The stated mission of the Naval Communication Service "is to
provide and maintain an adequate and secure communication system
for the Navy, based on war requirements; and to ensure operation
thereof to best meet the requirements of the operating forces and
the shore establishment, wherever located, primarily to serve command
and to facilitate administration."
To implement this mission the Navy provides facilities at
strategic locations.
These are classified as primary, major,
ane.minor,communication centers, and tributary offices. The six
primary communication centers are strategically located to furnish,
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as far as practicable, complete radio communication coverage
for the major portions of the ocean areas of the world. Major
centers provide more limited area coverage. Minor centers pro-
vide fleet communication support as may be required. Tributary
offices are served from the primary, maim., and minor communication
centers.
Certain channels of the radio trunk circuits, particularly.
overseas circuits, combine with nearly all of the landline
circuits of the Navy to form the Naval Teletypewriter System (NTX)?
which employs the tape-relay method of distributing traffic.
Navy point-to-point radio trunk circuits are integrated with
continental point-to-point wire circuits, - Many of these circuits
were designed and established about 1910 for manual telegraph
operation. As the demand for greater speed and capacity increased, =-
these and newer circuits were converted to automatic operation in
a progressive transition from Wheatstone and single channel radio-
teletypewriter to duplex, multiplex, and finally single-sideband
teletypewriter multi-channel operation.
U. S. Air Force.--The need for an airways communication
system capable of supporting military operations under all weather
tonditione-was brought home to the Air Corps in 1934 when a
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flight of new bombing planes was sent on maneuvers across the
United States. All that was available at the time was a series
of radio ranges and rotating light beacons operated by the
Department of Commerce. Communication between the ground.and
aircraft was restricted for the most part to short-range voice
contacts with the range stations. Messages from point of de-
parture to point of intended arrival were sent by Western Union.
It took four years to get funds and assemble equipment to
make the beginnings of what is now the Airways and Air Communi-
cations Service (AACS). At its inception, AACS established 33
stations consisting of a combination of control towers, ground-
air, point-to-point, and radio range facilities. A personnel
total of 3 officers and 300 enlisted men was authorized.
From 1938 to 1941, the East and South were fairly well covered,
while most of the Middle West and North West had little coverage.
? Existing installations serviced practically all the permanent
Air Corps stations of that day.
Operations outside the Us 34 were begun in April 19410 when
an AACS party was sent to Newfoundland to start work at Gander,
Lake.- From this?beginning. grew the extensive wartime ferry routes
toEngland over the North Atlantic and later to Africa through
the Azores.
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During all of 1942 the AACS was fully occupied in building up
ferry routes to all overseas theaters and in developing its plans
for further expansion. The leased bases in the Antilles were manned
for anti-submarine operations and also as way stations on a South
Atlantic route to India through Central Africa. In the Pacific, the
pre-war air route to Manila through Midway and Wake was closed off
by the enemy and was replaced in early 1942 by a South Pacific route
through Fiji and New Caledonia to Australia. In Alaska and Western
Canada a ferry route to Siberia and an airway along the Aleutians
were developed.
The years 1943 and 1944 were spent improving the routes started
in 1942 and in building new stations as offensive plans proceeded.
Operations in support of the Air Transport Command's flights over
the "Hump" in Southeast Asia were perhaps the most spectacular, but
concurrently a number of stations were established in China for the
14th Air Force and later for the early raids of the B-29's from
China bases.
In the spring of 1945, communications had to be provided for
the air power assembled at Okinawa for the projected assault on Japan.
-In France, the Lowlands, and Germany, the Allied offensives secured
new airdromes which had to be tied into the airways system.
Meanwhile, the great increase in the air establishment at home
called for more installations but naturally the overseas areas had
fiAt priority. Therefore not until after the war could WS
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inaugurate its planned Military Flight Service CommunicatiOne'Systom.
This is a network of strategically located stations which primarily
furnish point-to-point and ground-air facilities, but also provido.
aids to navigation such as control touers, radio ranges, direction
finders, ground controlled approach units and instrument landing
systems. This plan Was drawn Ip to complement the communications of
CAA,
Since the end of hostilities AACS has devoted itself to improving
its service. Facsimile is rapidly taking the load off the point-to-
point radioteletype circuits which transmit weather data. Multi-
channel equipment is being installed as rapidly as possible. A
global system of communications is in process of development.
AACS has participated in all the major Air Force operations
since World War II. It supplied all the airways communications and
navigational aids for the Berlin Airlift. It took part in large-
scale joint service maneuvers. It supplied communications to the
Lucky Lady II on its round the world non-stop flight. It also was
responsible for airways communications in Korea.
luartment of the Treasury
The only international communications facilities of the Depart-
ment of the Treasury are those of the United States. Coast Guard,
whtch is a part of the department in peacetime. The Coast Guard
operates as a service in the Navy Department in time of war, or when
the 4,President direct.
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The peacetime functions of the Coast Guard include law enforce.
ment or assistance in enforcing all applicable Federal laws upon the
high seas and waters'aubject to the jurisdiction of the United States
and promotion of safety of life and property in thosa_areas, These
functions require the use of radio for point-to-point, radiolocation?
and mobile services. .
The Coast Guard operates and maintains ocean stations in both
the North Atlantic -andliorth.Pacific oceans to provide search and
-rescue services at sea and-over the sea, communications, and air
navigation facilities, and meteorological services in such ocean
areas as are regularly traversed by aircraft of the United States.
It operates land telephone lines along the coastline connecting
lifeboat stations, lighthouses and other units. The facilities in-
clude eighteen radio broadcast stations. Medium frequency direction
finder stations, previously operated along the coasts, have been dis-
continued as a navigational did to the public, owing to the use,
generally, of shipboard direction finders in conjunction with marine
radio-beacons and the utilization of radar and "loran" systems. The
direction finder stations have been continued, however, at strategic
points for search and rescue purposes.
" ? _ ?
During 1949 the Coast Guard maintained 37,309 aids to naviga--
ticilt, many of which require radio transmissions. It also operated
34 fixed "loran" stations along with 14 "racon" stations along the
Atlantic and Pacific coasts and in Hawaii, Puerto Rico, and
_
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Department of Commerat 178.
The principal users of radio frequencies in the Department of
Commerce are the Civil Aeronautics Administration, the Weather Bureau,
and the Bureau of Standards. The remainder of the bureaus and offices
of the Department, in their international operations use both commer-
cial communications and the facilities of other Government agencies.
Most of their messages are exchanged with the Foreign Service of the
United States. Departmental procedures have been established for
handling such international communications. Under these procedures,
messages to and from the embassies, legations, and consulates of the
United States are routed through a liaison office in the Department of
Commerce and are handled by the Department of State.
Civil Aeronautics Administration.--The communications and air traf-
fic control systems of the Civil Aeronautics Administration were estab-
lished to provide for the safety of life and property in aircraft
operated on the civil airways and air routes in the United States, its
territories and possessions; and between the United States and foreign
countries.
Increased use of aircraft following World War I stirred up concern
about hazardous flying over unfamiliar territory and during periods of
poor-visibility. It also gave rise to two other problems: (1) preven-
? tion of collision, and (2) expediting the movement of aircraft.
Traffic adjacent to large airports and along major routes had become
heavy within a short time.
The Post Office Department, whose air-mail service then was the
only operator of aircraft during all types of weather, established
adronautical radio stations in 1920. This was the beginning of the
present complex aeronautical communications and radio navigation
to, which is the end-product of a number of organizational changes
through the years.
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The Aeronautical Communications Stations operated by CAA per-
form the following 14 functions:
Service "A"j- Collection and distribution of hourly and special
reports on surface weather, airfield conditions,
and inoperative air navigation aids, etc.;
Service "B" -Requests for and approval to Conduct an aircraft
flight; flight plans, in-flight progress reports,
and aircraft arrival reports;
Service "CH Collection and distribution of 3 and 6 hourly
weather data; pilot balloon reports, radiosonde,
-weather forecasts, etc.;
Service "D"' Radio broadcast of meteorological information,
advisory, messages, and advice to airmen;
Service "E" Two-way radio communications with aircraft in
flight;
? Service "F" - Dissemination of messages to assist flow and pre-
vent collisions of aircraft flying under instrup
ment flight rule;
Service "G" - Monitoring radio aids to air navigation and
communications systems;
Service "H" - Operation of non-directional type radiobeaeons by
ground stations;
Service "K" 4. Flight assistance services;
k Service "L" - Operation of lighting facilities (various lighting
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equipment of airports, etc.);
Service "0" - Collection and distribution of overseas and for-
eign meteorological data;
Service "R" - Operation of radio ranges by ground stations;
Service "W" - Airway weather observational service;
? Service "X" - Determining of information relative to the fixed
location, bearing, or heading of aircraft.
Four radiotelegraph stations were in operation in 1920 along
the transcontinental airway, and the first radiorange stations
installed at Bellefonte, Pennsylvania, in 1927. Two years later a
teletype circuit was placed in operation, connecting 13 stations
by means of 700 miles of leased wire. The general use of teletypo
machines meant that weather information could be transmitted by
employees able to type. This change helped to eliminate interference
in the crowded radio frequency spectrum. By the end of 1936 there
were 203 weather-reporting teletype stations.
Service "B" was inaugurated in 1938. During the same year the
need for communications services in the Territory of Alaska, and for
the proppsed transoceanic aircraft services was recognized, and action
was started on _both projects.
The first overseas-foreign aeronautical communications station
was vmpleted in 1940 at Net York. The station was needed to provide
two.way radio communication with aircraft operating on the Atlantic_
air routes.
Communications were also inaugurated between New York\
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and various points in Europe, the Azores, Bermuda, and Newfoundland
to collect meteorological data and to transmit information concerning
aircraft movements. In Alaska, 6 communications stations were com-
pleted and placed in operation. Most communications with Alaska
were by means of radiotelegraph because of the lack of landline faci-
lities
With the adventof World War II, the civil aviation systems
were closely coordinated with the military services. Four communica-
tions stations to handle _overseas traffic were completed in 1942--at
San Francisco; Everett, Washington; Anchorage; and Honolulu. Over--
seas airway communications facilities were further expanded in 1942
to include stations at New Orleans, Miami, and Balboa, Canal Zone.
The additional stations provided services to flights operating to
South and Central America and the Caribbean. An estimated total
of 64-mil1ion words of weather and flight traffic was handled during
the year.
Today the subordinate services of GAA use radio to maintain
communications With commercial and military aircraft, and also for
administrative purposes, weather information and safety requirements.
For international aircraft operations, the Administrator of
Civil Aeronautics provides directly, or through an agency sponsored
14 the Government for the purpose, the basic fixed and mobile tele-
communications system for the exchange of the following categories
of messages:
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1) Distress messages,
2) Messages for the safety of life and property,
3) Flight safety messages,
4) Meteorological messages,
5) Notices to airmen,
6) Flight regularity messages,
7) Aeronautical administrative messages,
8) Reservation messages, and
General airline operating agency messages.
It is the practice to handle without charge the messages in
categories 1 through 7. Reservation and general airline operating
agency message categories are not accepted when private or commercial
, facilities are capable of meeting aeronautical communications require-
ments.
Weather Bureau.,--In addition to its many offices and part-time
stations within the United States, the Weather Bureau, under agree-
ments with foreign governments, is active along many of the overseas
air routes. It maintains, in cooperation with the C.oast Guards
ocean weather stations in both the Atlantic and the Pacific, as well
as in the Arctic regions. Over 2.2 million weather report words were
received collect from foreign points and from commercial ships at
sax during 1949.
The Weather Bureau cooperates extensively with the Civil Aero-
nautics Administration and the Coast Guard in disseminating weather
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information for aircraft and ships.
Although the Weather Bureau does not own and operate any inter-
national cpmmunications facilities, it does lease international
landlino facilities to Cuba and Canada for the exchange of weather
information.
National Bureau of Standard.--The National Bureau of Standards
uses radio for its international frequency-measurement service2 for
research, and for special tests. It has no facilities for the handling
of rapid communications.
The Bureau's station WWV has a worldwide reputation in its field.
The station transmits continuously a highly accurate complex signal
on specified frequencies. It transmits accurate time signals,
Central Radio Propagation Laboratory forecasts of propagation con-
ditions, accurate audio tones, and accurate carrier frequencies. In
addition, the listener can obtain propagational data over the path
traversed by the signal to the listener's receiver.
D.....pLeartagLoLag12
The Department of State has a two-fold interest in telecommuni-
cations. It is responstble for international negotiations on telecom-
munications matters. It is also a large user of telecommunications _
for the conduct of its general operations, for the dissemination of
informational and educational matter abroad, and for the Voice of
America.
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poyational Communications.--The Department of State use?
practically all forms of communication to meet its requirement for
rapid interchange of instructions and information between Washingtbn
and missions abroad. Speed, security, and distance dictate heavy use
of telegraph service.
The Department maintains its own internal tmessage centers."
In Washington and at several of the large posts_ abroad, telegraph
centers are established for the centralization of the exchange of
traffic with commercial carriers and with communications centers of
the armed forces.
With the exception of certain isolated emergency operations, the
Department of State neither controls nor operates long distance
communications channels, no does it maintain or operate radio trans-
mitting or receiving stations for the handling of telegraph communi-
cations.
The Department of State has a direct leased Western Union cable
"varioplex" telegraph channel connection between Washington-and the
- U. S. Etylbassy in London and another between Washington and the U.S.
Embassy in Paris. These two direct channels accomniodate regular
message traffic charged for at the prevailing message rates.
In addition, the Department of State shares the use of another
Washington to Paris telegraph facility over a New York-Horta-Cherbourg
cable, which is- EtEplit Western Union-Army circuit (Western Union from
-
Ne York to.Horta and Army from Horta to Cherbourg over the former
German Emden cable). While this facility terminates at the Army
message center in Washington, the Department of State message center
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in Washington can be combined with it when the circuit is not in
use by the Army.
Voice.of ANerica.--The need of the United States for international
high-frequency broadcasting has been greatly increased by the up-
surge of interest in programs of international Information and edu-
cational exchange. Between the two world wars, there was a tremendous
growth, especially in Europe, of international broad-easting. Only
toward the latter years of that period did American commercial broad-
casting interests engage in relatively modest programs of international
broadcasting, chiefly directed to the Western Hemisphere. During
World War II,-however, the U. S. Government created worldwide radio
and presssarvices operated by the Office of War Information and
the Office of Inter-American Affairs. These activities were trans-
ferred to the Department of State by Executive Order on August 31, 1945,
for reduction and incorporation in the small program of information
and cultural exchange already started in that Department.
During the period immediately following the termination of hos-
tilities, the program was carried on under authority of annual
appropriations acts. Then it came under sovere Congressional attack,
and was almost eliminated by the summer of 1947.
With the developing world crisis, however, Congress responded to
k
the need for special machinery to tell abroad the story of the United
States and of the free world. Tho presumption of an -early -return
k
to a peaceful world, which lay beneath the earlier decision to cut
the Government program to the bone and let private information agencies
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carry on, was proved false. In January of 1948 Congress passed
the U. S. Information and Educational Exchange Act "to promote the
better understanding of the United States among the peoples of the
world and to strengthen cooperative relations."
High-frequency radio bulked large among the media available to
carry out this worldwide commitment. With more and tighter restric-
tions and barriers to the dissemination of information, high-frequency
radio appeared to be the best way to get the truth about the free
world into iron-curtain areas. The geographical position of the
United States has heightened the value of high-frequency operations
in its international radio broadcasting.
The Voice of America not Only provides service for its own
broadcasts, but also for the United Nations at New York and the armed
forces of the United States abroad.
For transmissions from the-United States, the Voice of America
generally leases transmitter time from various commercial broadcast
or communications companies. ,For transmissions from overseas points
the Voice of America, in general, owns its own facilities. It-also
transmits to certain stations in other countries for rebroadcast by
them.
This rapid expansion in the Voice of America poses a serious
pri5blem for world telecommunications, especially in the high-frequency
band. In November 1950 the Voice was Ubing 69 frequendies on the?
avel,ags of seven hours per day each. These are a substantial per-
centage of the total spectrum space available to the world for
-
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international broadcasting under the Atlantic City Table.
_Government policy calls for a large Increase in radio instal-
lations used for-the Voice. These increases, however necessary and
desirable,may put more pressure on the spectrum during the years
immediately ahead. The future after that will depend on the level -
of international crisis.
-Information for the Foreign Press-.--In addition to the broad-
casts of the Voice of America, the Department of State sends around.
the world a daily news service of information about the United States
for use in newspapers and other media abroad.
--For this service, the Department's Division of International Press
and Publications operates a teletype communications center in
" Washington. Into this center pour thousands of words daily for
_transmission to New York where they are sent overseas by commercial_
radiotelegraph facilities.
These Morse transmissions are received by radio operators at
United States missions abroad and are reproduced and distributed to
press and other information outlets in those countries. Ships and
other stations of any nation also may intercept these radio news
reports.
Other Government Agencies.--Many independent agencies and com-
missions of the Federal Government which do not own or lease inter-
national circuits transmit and receive international communications
through existing Government or commercial company facilities. Be-
tween 85 and 90 per cent/of this wordage is transmitted over Government
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facilities at practically no cost to the originatirig- office.
188.
The
Economic Cooperation Administration and the Veterans' Administration,
the largest of those users of international communications, route
the majority of their traffic through the Department of State and
the military services, respectively.
The American Red Cross, although not a Government agency, is
privileged to use Government-owned international communications facil-
ities to handle its traffic. During 1949 over 7 million words were
transmitted by the armed forces for this organization.
-Control of Government Systems
Federal Government agencies now decide, at something less than
top level, the amount and type of record telecommunications matter
that is to be transmitted to overseas or foreign points by means of
facilities controlled by the Federal Government and established
primarily for purposes of national defense. Too great a diversion
is not conducive to the best health of the nation's telecommunications
networks.
If our national policy recognizes the desirability of strong
private American companies operating in the international telecom-
\
munications field, there must be some form of control to insure that
a substantial amount of Government message business is handled-by
commercial agencies, so that the Federal Government does not, perhaps
unwittingly and by unilateral action of independent agencies, bring
abOut a total or partial collapse of commercial facilities by
eliminating their largest customer--the Government,
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From an even broader point of view, there would appear to
be a need for a mechanism-to coordinate and, to A-certain-degree,
regulate the use of communications facilities by Government agencies.
Private companies under the necessity of providing an attractive and
economical service to the public and under strict regulation by FCC
?
are forced to justify additional frequency space, adopt rigid
economies, and serve the public welfare.
It is recognized that Government departments, especially the
military agencies, have from the technological point of view built a
superb radio communications system. But they are not under the same
pressures as private companies to justify expansion into now frequency
channels and to enforce rigid 'economies. Even the actual costs of
operating Government communications facilities are almost impossible
to determine. Clearly, in managing such a vital national asset) the
Government must keep its own house in good order, as well as do what
vial(
is necessary to maintain the private facilities which are so essential
both to the public and the Government itself.
Use of Government Facilities for Commercial Messageg
To provide a service of public correspondence to and from points
where commercial facilities are not available, Congress has authbrized
the Secretary of the Navy to furnish such service through naval radio
dations. This authorization is given by Section 327 of the Communi-
cations Act of 1934, as amended.
4, Certain (*Ler departments of the Government have recently re-
quested similar authorization from Congress, but such authority has
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not yet been granted.
Relationships to Commercial_gyatams
Though Government-owned facilities handle a large portion of
Government communications, the Federal Government is dependent upon
commercial overseas facilities to round out its over-all needs for
international service. This is true in two major respects. The
Government finds in some cases that it is more economical and effic-
ient to lease or subscribe to a circuit or channel from a common
carrier than it is to install and operate a facility of its own. For
the transmission of small amounts ef traffic to remote points, the
Government often finds it more economical or convenient to route
Such traffic via common carriers than to send it part way over
Government facilities.
Government also depends heavily upon the existence of common
carrier facilities duringthe early stages of war. Because it is
not possible to anticipate the precise nature and locale of hostil-
ities, the armed forces try to maintain a minimum basic system in
peacetime and depend upon appropriate expansion in wartime, utilizing
common carrier facilities to tide them over.
The Merger Question in International Record Communications
Historical Summary_
'? Proposals for merger of American companies providing cable and
radiotelegraph services have provoked vigorous debate ever since
ral!lio emerged as a.practicable means of international communications.
The traditional American policy against monopoly has affected this
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debate throughout. During the years immediately following the
first world war, it was a chief concern of the Government?the
Navy Department in particular?that the well-established cable
companies should not be allowed to hamper the full development of
radio as a medium for telecommunications. Hence arose the obstacles
to the ownership or control of radio companies by cable companies
later embodied in Section 17 of the Radio Act of 1927 and in Section
314 of the Communications Act of 1934.
A related policy introduced in 1943 calls for the separation
of companies doing overseas business in record communications from
domestic record communication companies.
Within this broad framework, however, proposals have persistently
recurred during the last twenty years for mergers of American
communications companies. Fundamental to this problem is the
possibility offered by radio of providing, with relatively small
capital outlay, circuit capacity exceeding the normal requirements
of international communications. This raised difficult economic
questions of cost of service, and-the future profitability of cables
in the face of radio competition. There are some who have suggested
that cables are now obsolete but considerations of reliability
and security point to the necessity of retaining cable service.
*t Several of the companies have asked permission to merge in the
hope of avoiding deficits. From time to time, some Government de-
phrtments have favored consolidations for reasons of national
defense, conservation of radio frequencies, or forother reasons, --
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while other Government departments have opposed consolidation.
Some of these agencies have shifted their positions from time to
time on the desirability of one or another form of merger. At no
time have all the interested executive agencies been in agreement
on this issue. As of May 1950, this was still the case.
". The move for merger in the field of international record com-
munications has never been able to win complete Congressional
support because of traditional resistance to monopoly. Numerous
hearings have been held by committees of the Congress, but no legis-
lation has resulted. Either the case has not been strong enough, or
prevailing international situations have delayed consideration of
the various proposals. In the meantime, however, Congress has
approved mergers of telephone companies and of domestic _telegraph
companies, and permits the domestic telephone companies to operate
in the international field.
During World War I, when the Government operated the telegraph
industry, the_U. S. Navy was given control of the transoceanic
radio stations in the interest of national security. Immediately
after the war, a bill was introduced in Congress providing for the
control and operation by the Navy Department of the then existing
private U. S. radio stations used for overseas communications. The
dbasure had Navy support. Under its provisions, the Navy was to
operate the private stations as well as its own stations for the
hdridling of both commercial and Government international communi--
cations. The bill did not become law. The Country would not accept
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Government ownership or operation of these facilities.
The first expression of Congressional policy on merger of the
privately owned cable and radio companies came in the Federal Radio
Act of 1927. This law specifically prohibited mergers of radio
with cable companies, and vice versa, if such mergers would lessen
competition or restrain trade in interstate or foroign commerce. The
Radio Act also declared that anti-trust laws are specifically
applicable to the manufacture, sale, and trade in radio apparatus,
and to interstate or foreign radio communications.
The Communications Act of 1934 included the same provisions.
In 1939 the Senate Committee on Interstate Commerce requested
the FCC to study the merger question afresh. The Commission reported
in the following year, recommending permissive ,merger of the cable
, and radiotelegraph carriers.
After lengthy hearings, Senator White and Senator McFarland
introduced a bill in 1941 to permit mergers in both domestic and
international telegraph systems. When the measure, was before the
full committee during the following year, however, the Navy Department,
previously a supporter of merger, objected to changing the law to
permit changes in the international industry at that time. The
Navy thought that the structure of United States overseas telecom-
_ ---_
munications should notbe altered during the war. Provision for
this type -of merger was deleted from the bill; although the House
restored it, the bill was not voted on before the end of the 77th
Cohgress.
The problem of domestic merger was felt to urgent, however,
-7that-it,...could not wait for the conclusion of the war. The Postal
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Telegraph Company .was deeply in debt, and there appeared no prospect
that its financial affairs could possibly be put in order. The 78th
Congress took up the question of domestic merger in 1943, and amended
the Communications Act so as to permit Western Union to purchase
Postal Telegraph. This permissive legislation required Western Union
to divest itself of its international business, Western Union Cables,
within a reasonable period of time according to conditions and pro-
cedure specified in the Act, and with the approval of the FCC. Up
to the present time, Western Union and potential buyers of its cables
have boon unable to agree on terms of sale. Western Union Cables
continues from year to yeat as the FCC renews permission for it to
continue in its present ownership. This situation has given rise to
suggestions that the provision for splitting domestic from international
carriers be stricken from the law.
1
In 1945 resolutions calling for study of the international merger
problem again were introduced in Congress and further hearings were
held. No new action resulted from the Congressional hearings, how-
ever. Senator McFarland, on discovering that the Department of State.
no longer supported merger while other executive agencies and the FCC -
favored it, took the position that Congress could do nothing until the
executive agencies arrived at a common policy.
In 1946 the newly organized Telecommunication Coordinating ,
qemmittee, at the suggestion of the Navy Department, tried to work
out a Government policy on merger. The Committee was unable to reach
a unanimous recommendation after thorough exploration of the issues
by an ad hoc subcommittee. This ad hoc group submitted a report in
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December 19460 which set forth the arguments of proponents and
opponents of merger. These arguments are summarized below.
AMMaik_f2r_112ELP
The arguments by proponents of merger of the international
ved.o
record communication companies included the following points:
Fronuenem_g2Bservation.--By eliminating duplications in circuits
and inefficiencies in routing, unification would release a largo
number of frequencies, which could be used to handle increasing traffic
volumes, establish new circuits, improve speed and reliability of
existing services, and promote the development of new services. Such
an elimination of the wasteful use of frequencies would relieve pres-
sures on the radio spectrum and would strengthen the United States
position at international conferences in urging adopting of new tech-
niques designed to make the most efficient use of frequencies.
Eummia_bylag2.--Unification might permit the retirement of
a large amount of the telegraph plant maintained by competing carriers..
Not all of this plant is necessary to meet the nation's communications
requirements. . Retirement of some.of it would result in savings in
communications costs, as well as the ultimate reduction in the invest-
ment on which a return is earned, and could be reflected by substantial
rate reductions and improved service.
Traffic RoutIng,--Traffic betteen the United States and foreign
oints may be handled over a variety of competing cable or radio routes,
some of which are more advantageous than others to United States
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interests. Merger would permit each -facility to be used to its best
advantagel.technically and economically.
_Standardization.--Unification would promote the use of uniform
operating practices and equipment throughout the unified system, a
procedure which would strengthen the United States position in favor
of worldwide standardization. Standardization among American companies
could be at the highest technical level, since merger would permit a
complete interchange of patents and pooling of research activities
and talents.
Rela1120._with Foreign_garmiers.--Merger would place the American
international communications system more closely on a par, so far as
influence and bargaining power are concerned, with the foreign mono-
polies with which it must deal. This would permit the unified carrier
to insist on equitable operating arrangements and would enable the
United States Government to give more direct guidance and support to
the policies of the unified company in its dealings with foreign
Diatoms.
Inuma_Bgall2140.--Merger weuld help the Federal Communications
Commission to achieve its objectives of providing a worldwide communi-
cations system, with adequate facilities at reasonable charges. A
unified carrier could be required to extend service to foreign points
on h worldwide basis, whereas it might be difficult to impose such a
? requirement on one out of several competifig carriers. Because of the
great divergence in earning power among the various carriers, reasonable
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rates for the most prosperous company would tend to drive competing -
carriers out of business, a circumstance which may deter completely
effectlye regulation. Unification would also facilitate the severance
of the telecommunications system from l intercorporate manufacturing
affiliates and from foreign activities.
Securitv.--Merger would foster security in the sense that it
would provide a more efficient, integrated, and standardized communi-
cation system, which would be available for military use and planning,
but it would have little or no effect upon cryptographic security,
loyalty of communications employees, or anti-sabotage measures.
Ammota_agalot Mega
Of the Government departments represented on the Telecommunica-
tions Coordinating Committee, those opposed to merger based their case
on these major points:
Morapoly.--United States economic policy, both in the domestic
and in the foreign field, traditionally has been opposed to the creation
of monopolies, especially those which would receive special Government-
sponsored privileges. Generally, a favorable politica', economic, and
technical climate results from competition tempered to the extent
necessary by regulation. In view of this traditional policy, the
proponents of merger must sustain a irery heavy burden of proof that
mer er is in the national interest.
Egaquencv ConservatIon.--It is recognized that a merter would
have'' the potentiality for the immediate conservation of a substantial
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number of frequencies. However, the strength of a monopoly in its
dealings with the regulatory agency might make it difficult to realize
this saving.
Economic Considerations.--Substantial economies could be accom-
plished under a merger. But, even if potential savings might be
immediately realized, it is questionable from a long-run point of
view whether the continued existence of competition would not result
in greater economic advantages.
Regulation.--Experience indicates that regulation of a monopoly
is difficult. Standards of performance are not readily available to
the regulatory agency. The self-policing of an industry inherent in
a competitive situation is not present in a monopoly. These factors
outweigh the apparent superficial advantages which a regulatory agency
might have in dealing with a merged company.
glhar_Csuliesatiops.--Other considerations such as improvement
in traffic routing, increased standardization, and the promotion of
advantageous relations with foreign carriers also can be achieved
through competition supplemented by vigorous regulation. It was not
contended that perfect results would be achieved in those fields, but
it was argued that, on the whole, results at least comparable with
those under a regulated monopoly would be possible.
+4
-Economic Outlook for U., S. Cable and Radietelegraph-Companies
Although many factors have been involved in previous arguments
over merger of the international record communication companiesl-the
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question now appears to rest primarily on whether the companies can
survive economically without merging. All of the -Board's discussions
of the subject with industry and labor leaders and Government officials
stressed the economic problem, while other elements of the controversy
were given secondary consideration.
For that reason, the Board arranged for an economic analysis of
the industry and a forecast as to its future profitability to be made
by the engineering firm of Ford, Bacon & Davis. The balance of this
Chapter, except for the Conclusions, is adapted from the survey made
by that firm.
LialaSlalua.--The Western Union Company operates 14 submarine
cables, of which eight connect the United States with England, two
with the Azores, and four with the West Indies. Five of the eight
lines to England are leased until the year 2010 from a British company.
The 14 cables measure 30,000 nautical miles and permit the company to
furnish all classes of telegraphic message service directly, or indi-
rectly- through connecting carriers, to all parts of the world.
Three affiliates of the International Telephone_and Telegraph
Company, all of them wholly-owned subsidiaries of the American Cable &
Radio Corporation, are engaged in the American international record
A
'communications business. Six cables between New York and Europe, via
Ahe Azores', Neva Scotia and Newfoundland, are operated by the Commercial
Callle Company. Total length of its lines is 22,000 nautical miles,
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They make possible cablegram service to all parts of Europe, Asia,
and Africa. Through affiliated organizations, the company also pro-
vides massage service to Latin America. All America Cables & Radio,
Inc., has five lines, measuring 24,000 nautical miles, between the
United States and South America, Central America and the West Indies.
In addition, it operates several cables and a number of international
radiotelephone and radiotelegraph stations in South America. Mackay
Radio & Telegraph Company, Inc., maintains direct radiotelegraph
circuits to some 40 overseas points, furnishing all classes of record
communications service on a worldwide basis. It operates radio stations
in New York, California, Hawaii, the Philippines, and Tangier. The
Tangier station is used to relay messages to points in eastern Europe,
North Africa, the Near East, And India,
RCA Communications, Inc., provides worldwide message service
through operation of direct radiotelegraph circuits to some 60 overseas
points and arrangements with connecting carriers to reach other points.
The company has four radio stations near New York City and one near
San Francisco, as well as stations in Puerto Rico, Hawaii, the Philip-
pines, Haiti, Dominican_Republic, Okinawa, and Tangier. Direct circuits
reach Mexico, Central America, South America, the West Indies, Europe,
the Near East, the Far East, Australia, Oceania, and North and South
Africa: The company also operates a radiotelegraph circuit between
New York City and San Francisco for domestic haul of international
--_messages and a leaseckwire circuit between New York and Washington, D.C.
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2maller Carriers.--Radiomarine Corporation of America furnishes
all classes of radiotelegraph message service from shore-to-ship and
ship-to-shore. Transmitting and receiving stations are located on
both coasts of the United States and at St. Louis, Mo., Buffalo, N.Y.,
and Port Arthur, Tex. The company also manufactures, sells and services
mobile radio station equipment.
Press Wireless, Inc., provides a specialized radiotelegraph service
to newspapers and press associations. It operates radio circuits to
some 19 overseas.pointa,-and has stations at New York, Lian Franciaco,
Manila and in Europe. The company also owns subsidiaries that manu-
facture and sell communications equipment in Latin America.
Globe-Wireless, Ltd., controlled by the Robert Dollar company,
furnishes telegraphic message, service from the United States to
'Honolulu, Manila, Shanghai, and Havana. Its radio stations are located
in New York City, San Francisco, and Honolulu. Globe also operates
a-ship-shore radiotelegraph message Service.
Tropical Radio Telegraph Company is affiliated with the United
Fruit Company. Tropical's message service is caried over direct
.circuits to Central America and the West Indies aid by connecting
carriers-to the rest of Latin America. In the United,States, it operates
radiotelegraph stations at Boston, Miami, and New Orleans. In Central
Amehcan countries, 20 stations provide both radiotelegraph and radio-
telephone services.
*. The United States-Liberia Radio Corporation Was established by the
ElaTRIGIn
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Firestone Tire & Rubber Company. Its operations are restricted
to a radiotelegraph circuit between Akron, Ohio, and Harbell
Liberia.
The South Porto Rico Sugar Company furnishes radiotelegraph
Service to five Caribbean points arid to ships at sea.
Financial Performance
The financial data used in the study were obtained directly
from the companieh involved. In the course of obtaining the
financial information, conferences were held with accounting
executives of the principal companies.
The information contained in Tables I, II and III was
secured from the larger companies and included balance sheets,
income statements, and various related data for each of the years
1944 to 1949 and for the nine-months period ended September 30
-1950. The principal purpose of this information was-to. provdea
knowledge of financial status and operating results through the
'recent years and up to the latest date for which actual data were
.available at the time ofundertaking the study.
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TABLE I
INTERNATIONAL RECORD COMMUNICATIONS COMPANIES OF THE UNITED STATES
GROSS OPERATINgEggLrEAR1_4_j__22
Major Carriers
Western Union Telegraph Company
(Cable Division) OW)
American Cable & Radio Corp. Suboidiariest
Commercial Cable Company (OW)
All America Cables & Radio, Inc.(AACR)
Mackay Radio & Telegraph Co. (MRT)
Total A.G. & R. System
ROA Communications, Inc. (RCAC)
Total Major Carriers
Smaller Carriers
Radiomarine Corp. of America (RM)
Press Wireless, Inc. (PW)
Globe Wireless, Ltd. (GW)
Tropical Radio Telegraph Company (TRT)
United States-Liberia Radio Corporation
South Porto Rico Sugar Company.
Total Smaller Carriers
Total'A11 Companies
Revenue Per Cent
(Thousands), of Total
$ 8,208
17.85
3,951
8.59
9,713
21.12
6,528
14.19
20,192
43.90
12,236._
26.58
40,626
88.33
1,277
2.78
1,294
2.81
1,306
2.84
1,406
3.06
78
0.17
_ 7
0.01
5,368
11.67
--
$ 45,994
100.00
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TABLE II
AGGREGATE ADJUSTED NET INCOHE BEFORE INCOME TAX
MAJOR
204,
Year
0S-3221-2
Income in
Per Cent
2f-kalal
----L---rmt?P-4-?1?is
Adjusted Net
Basis for * Income before
ALUM- ;22922-1022-
?
1946
61,478,
1,622
2.6 %
1947
60,830
-2,395
-3,9
1948
_
61,206
-738
-1.2
1949
60,710
1,177
1.9
1950 (9 mos.)
63,605
2,618
4.1
0011.0?00?1?N./..??1111.11???????????????m?=1??????00.
* The basis for measure of income is in each_instance the _sum of
net property and actual net working capital.
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205.
Table III
Comparison of Gross and Net Operating Revenues
, Major Carriers - Interngl2na1 Industr
- (Thousands of Dollars
9 Months
WIRMY 1946 _1242_ _1241_ 1949 1950
_gross Revenues
.WUC
7,790
7,402
8,224
COO
4,445
4,642
4,144
AACR
8,639
9,934
9,835
MRT
4,767
6,041
5,599
ROA?
11j700
lasig
Total
nkt Reventm
_114226
, 38.867
39,719 .
49.,211
WUO
1,296
613
1,411
COO
.1,039
.?1,896.
.4,075
AAOR
673
554
324
MRT
-10042
-837
, -818
IAO
2,,,a4g1,
?g2
22
Total
,
:_13.5.21
??J2.4
Net Revenues in Per Cent
Of Gross Revenues
_
WUO
_
16.6%
CCO
-23.4
AACR
7.8
MRT
-21,,9
. ROAC
18 8
,
Average 60.1%
8.3%
17.2%
-40.8
-25.9
5.6
3.3
-13.9
-14.6
-0.2,
?,AL
-4.0%
1.5%
8,208
5,993
3,951
2,854
9,713
7,991,
6,528
4,919
12.122
9,674
42,62?,1.43
1,505
1,438
.4,111
.?597
536
1,019
71
224
854
959
J.441
?1,855
18.3%
-.28.1
_24.0%
-20.9
5.5
12.8
1.1
4.6 '
___222_ 2A2_
4.6% 9.7%
As shown in the precedingtable, the average ratio of aggregate
neyievenue to gross revenue has improved since the, low point or
deficit in 1947. The Commercial Cable -Company continues to show a
net revenue loss in 1950 although its position has improved. While
to some extent the continuing net revenue losses of Commercial_Cable
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maybe attributed to the -decline in gross revenue? it is evident
that total operating costs are higher in relation to gross revenues
than those of the other major carriers,
Comparative Utility of Services
In making their survey, tho engineers prepared a questionnaire.
to determine the sought in using each type of rapid
international communications (air mail, telephone, cable, and radio-
telegraph) and the experiences of the users with respect to how well
these objectives had been achieved. Selected customers were asked
whether they were making a conscious effort to change from one type
of communication to another. They were also questioned as to amounts
presently spent on cables and their estimates as to the amounts likely
to be spent in the near future.
Information was sought.to determine whether each typo of communi-
cation did have its definite place in customers' operations. It was
believed that if this were true and that each type was serving its
purpose, it would be unlikely that the present pattern of services
used would change much in the future. If customs and habits have been
the main influence in determining the uses of each type, however,
material changes in the pattern Might occur.
The consensus was that the use of a particular type of communica-
? tion is dictated by its utility and that each fills its particular
need. It does not appear, therefore, that there are any conditions
that may materially change the pattern in the near future. Each type
ht0 been available _for a considerable _period of time and the pattern
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has become fairly stabilized.
The survey_ disclosed that there is a definite field for cable
.and radio messages in which they are unlikely to be supplanted by -
either the telephone or air mail. In addition, there are fringe
areas in which the use pattern of telephone, telegraph (cable and
radio), and air mail is variable. These fringe areas, however, appear
to be relatively small compared to tha area in which the use of cables
and radiograms is fixed..
Answers to the inquiries indicated that the various typo oe
rapid communications are used under the following conditions:
Cables and Radiograms -
1. When speed and certainty of delivery at a definite
time are necessary, and
When a written record is important, or
Where cost is a consideration as compared with long
distance telephone, or
When immediate responses or a conference are not
noc?ssaryi
Overseas telephone -
1.
When immediate decisions or responses aro lazoaastary, or
2. When a conference (back and forth conversation) is
desirable.
Air Mail ...
-.1. When high speed is not essential and
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When certainty of delivery as of a definite time
is not essential, or .
-
3,. Where the length of the message renders a letter pre-
parable, and
Where communication costs are of importance in com-
parison with the amount of the transaction affected.
It was generally agreed that the international telegraph service
As, on the whole, very good and reliable. Besides the features noted
above, cables and radiograms have the additional advantage of getting
prompt attention whereas letters may be set aside temporarily., A
large itpurance company stated that this is one of the chief reasons
it uses cable and radio messages to the extent it does. Some companies
attempt to overcome this by writing important air mail letters on
special forms that resemble cables but they have fouild that this
practice is not altogether successful.
The delivery time for "ordinary" telegraph messages is said to
range, at present, from about ten minutes (in the case of major direct
points like London and Paris) to about an hour. A cable or radio
message can be sent from New York to London and a reply received in 20
to 30 minutes. Prior to World War II dealers in arbitrage used to send
cables andreceive replies in from twojto four minuteas, but nuoh aer--
vic4is_not rendered now.
Many companies reported extendive use of the right letter classi-
fieatIon of cable and radio service. This is borne out by the records
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of the major international companies which show that about 64 per cent
of the public messages sent during the third quarter of 1950 were
night letters. This service assures delivery at the start of the
following business day, a period of 12 hours elapsed time from Now
York to London, whereas an air mail letter from New York to London,
under minimum pickup and delivery conditions, requires 18 hours. There
is, therefore, no question as to the necessity for a cable or radio-
grain when delivery at the start of the next business day must be assured.
Telegraph service also is preferred to long-distance telephone
in many cases except when immediate decisions or disCussions are re-
quired because (1) delivery at a certain time is more sure (2) it is
usually less expensive, and (3) it gives a written record.
The principal advantages of long-distance telephone messages lie
-in the ability to engage in discussion, which may be important in
sclarifying certain situations. They also get immediate attention
whereas a telegram or a letter may be put aside. Groat strides have
been made in international long-distance telephone service and the
average elapsed time to put through a call has been materially
reduced. The major time-consuming factor, however, is'that of locating
the person called. This may take considerable time. In fact, it was
said to be common practice to send a cable to make an appointment for
a telephone call.
While the cost per word on the telephone may be quite low as
compared to a telegram, it was the consensus that the actual cost per
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message generally was far less by telegram than by telephone. In the
latter case, much time is often wasted in amenities and irrelevant
conversation whereas in a telegram the heart of the message can
usually be compressed into relatively few words.
While the transmission over the telephone was said to be usually
satisfactory, it is not entirely reliable and instances were cited
where poor transmission seriously impaired the value of telephone
service. This is not apt to occur with telegrams, for if the message
can not be sent one way it can be rerouted and will get through by
another way.
Although air mail is widely used and has taken business from the
cable and radio industry in the past, it appears that this competition
has reached a stable condition. Two factors have been cited as
limiting the use of international air mail--first, the possibility of
planes being grounded or diverted on account of weather conditions,
and, second, regardless of the flight speed, pickup and delivery ser-
vices are time-consuming. Delivery service is said to be particularly
poor in all foreign countries except in the major cities. The engineers
were advised that for most-inland-points at least 24 hours should'be
added to the scheduled 16-hour service to London, Paris, etc. One
company having extensive operations in the Near East stated that the
normal air mail delivery' service from its office in New York to its
branches in the field was from five days to one week. This compares
with a normal telegram service_ of a few hours at most for ordinary
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messages and overnight for night letters.
The main drawback, however, appears to be the undertainty as
to delivery time of air mail. While practically all air mail messages
'might go through on schedule the fact that a few might be delayed is
a serious deterrent to sending any message by air mail when certainty
of delivery time is of material importance. Air mail is widely used
to send longer messages than would be economical by cable or radio, to
send documents and confirmations, and to send many messages for which
certainty of delivery is not important. For other purpoees, however,
the uncertainty of delivery of air mail is often too great a risk for
the savings involved.
It appears, therefore, that except to correct abuses by comes'pondents in the use of cables and telephone by puriodle caypense-savints
campaigns, there is little likelihood that air mail will seriously
encroach further on the cable and radio business.
pletio3:11,...es?L.L._norig_Internationalga=12ra
Except as specific cable and radio companies have direct service
to certain areas, or when they serve certain areas exclusively, cus-
tomers reported dividing their cable and radio business among the
various companies in the industry. One bank said that it follows a
policy of reciprocity and distributes its business approximately in
._,P14oportion to the-balances,maintained in the bank by the various
carrier companies. One large insurance company conducting business
:mainly with London through night letters reported confining its business
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212,
almost exclusively to oneS carrier because of the satisfactory service
received. However, this is an exception, as most companies said they
4
believed that by dividing their cable and radio business they main-
tained competition and thus got better.service from all carriers.
Potentia ities of Moral:
Edela_aerylee and Develoment.--The fundamental purpose of any
merger is to save money. This is generally accomplished by greater
flexibility and efficiency in the use of facilities reduction in
,duplicated facilities, and savings in administrative and labor costs.
A portion of the monetary savings is assignable to the stockholders
up to a reasonable return on the investment; that is, a return suffi-
cient to assure adequate financing of current plant investment and
reasonable development costs,
It is to be expected that at least some of the savings derived
from a merger would be reflected in direct public benefits; principally
through reduced rates. Also, it may be reasonably assumed that any
development expenses ultimately would be reflected in similar direct
public benefits.
The fact that the Western Union-Postal Telegraph merger in the
,domestic field was followed by reportedly poorer service and higher
rates is not a criterion unlesp it maybe shown that the service would
lurth) been better and the rates lower if the competitive situation had
continued. The evidence at the time of that merger indicated that the
Powehl Telegraph Company was on the verge of going out of business, in
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which case the service, at least in so far as coverage is concerned,
might have been less than now exists under the merged companies. The
engineers l survey of communications users, including the State Depart-
ment, clearly indicated that there was a greater interest in service
than in rates. Rate reductions are a measurable public benefit and may,
therefore, be overemphasized and given too much weight, to the detri-
ment of service. To this end, it is important that a large share of
any merger saving be directed to maintenance of adequate service and
, to development expenditures having the same ultimate objective.
The allocation of income, after operating expenses and taxes, is
generally subject to supervision by the regulatory authority. At the
same time, the regulatory authority is expected to police the matter of
adequate and proper service and this directly affects operating expenses.
BX0EISSiVe service to the detriment of adequate development or rate
decreases may be just as improper as insufficient or relatively poor
service. Competition may cause excessive service in competitive areas
to the detriment of service in other areas.
The matter of the maintenance of less profitable or unprofitable
services is of considerable importance in considering the question of
merger versus competition. While competition may serve as an incentive
for the preservation of borderline services in competitive areas,
obviously the maintenance of dual service, in areas where even one
_
service may not be justified, is uneconomical and has the effect of
indbasing costs over the whole system which Will be reflected
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ultimately in the overall rates of both competing operations. The
effect of merger is to:
1. Eliminate unnecessary duplication of services, and
2. Remove the incentive to maintain any service in areas where
revenues are insufficient to support costs.
While the first is a beneficial result of merger, the second may
be a disadvantage overcome either through an enlightened management or
rigid supervision by the regulatory authorities, Actually, a monopoly,
through the elimination of duplicated out-of-pocket expenses and general
reduction in assignable overhead charges, should be better able to
sustain certain borderline operations. Finally, certain other points
not now served may become economically feasible to serve under a unified
operation.
21142maal ktitude.--The customers consulted :or zamcst 11:aanimous iii.
their reaction to the possibility of a merger of all cable and radio
companies. All but one of the customers opposed the suggestion in
principle as being detrimental to the type of service they might expect
to receive. Although the engineers' questionnaire did not seek their
opinions on this subject, practically all of them volunteered their views
when the reasons for the survey were explained to them. In substantiation
of their views, many cited their experiences with foreign carriers, most
of 41lich are monopolies. These experiences indicated to them that, with:-
out competition, carriers were very indifferent to customers' reactions.
Inquiries regarding confirmation of messages originating abroad often
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wore unaswered for several days or disregarded entirely. This
condition appeared to be so common as to convince them that it
was a dufinite result of a monopolistic position. Also, while a
number of the largest usors of domestic telegraph services said
that they had not noted any reduction in the quality of domestic
service after the Western Union Telegraph and Postal Telegraph
merger, another and even larger group stated that they had ob-
served a definite deterioration in the quality of service since that
Merger. A few users expressed the view that there might be no
,objection to merging all the cable companies into one group and
all the radio companies into another as this would still retain a
degree of competition which they believe to be essential to main-
taining telegraphic service of high quality.
Labor's Post&La.--Consideration should be given to the con-
tention that wage scales in the record communications field have
been held down to some extent because of the long-standing record
of unprofitability of the industry. It is ?to be anticipated,
thereforel-that labor would expect a share of any financial benefits
-resulting from general improvement in the business, whethbr it be
the result of merger.or any other cause. 'Consideration mUst also
be given to the probability of delay in savings .on labor colts
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under a merger. It is unlikely that permissive legislation
would allow an immediate general reduction in force. Rather,
it would probably require retention of employees for periods
of time,in proportion to their length of employment in the
industry.
There does not appear to be any unanimity on the part of
labor for or against merger, expressed opinions ranging from
unqualified approval through conditional acquiescence to outright
opposition. It appears that labor is not satisfied with the
results of thea Western Union-Postal Telegraph merger. Opportunity
for expansion of labor's views would normally be provided through
public hearings held in connection with any proposed legisla-
tion.
Carriers' Position,--The major international carriers told the
engineers that they are in favor of permissive legislation for merger
of international record communications. There is no positive evidence
that these organizations actually would merge under such legislation.
There may be an effort on their part to agree upon a merger but
there is considerable difference of opinion among them as to
the terms and conditions.
Western Union has suggested not onlythat the international
operations should be merged but that they_shouldj* consolidated with
8
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Its domestic telegraph business under its management. This company
claims, among other reasons, that the terms of its lease of five cables
from Anglo-American Telegraph Company, Ltd., might prove an absolute
block to the transfer by Western Union of these fivejdables into a
merged-company which did not include Western Unionis domestic operations.
American Cable & Radio Corporation and RCA Communications, Inc.',
adhere to a consolidation of international facilities only.
? Because-of theseJlifferendos of opinion, it:has been stated-that_
-any permissive legislation should at least clearly indicate an intent,
if not contain a specific directive, as to the desirability of such
mergers. This should be sufficiently emphatic so that it could be used
to resolve inter-company differences.
Radiomarine Corporation of America would participate in a consoli-
dation of international facilities only to the extent of its ship-shore
communications, but not? its equipment manufacturing, selling and
servicing operations.
Press Wireless,_ Ltd. and the South Porto Rico Sugar Company told
the engineers that they do not oppose permissive merger legislation of
international companies, provided they are adequately protected from
unfair competition by the merged organization and from any undue pressure
upon them to join any such merged operation. Thesq companies would
remain outside of any merged operation resulting from permissive legis-
lation.
Tropical Radio Telegraph Company is the enly.parrier.opposed-to--
._
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merger. Should such legislation be written: howeverl-their position
is similar to that of Press Wireless, Globe Wireless, Ltd., said that
it does not, at this time, desire to express any views on an inter-
national merger. United States-Liberia Radio Corporation has not
expressed any opinion, .
Accordingly,: it may-be said that the consensus of the industry
is for permissive merger of international record communications speci-
fically divorced from domestic operations with provision for adequate
protection of the carriers which do not wish to join the consolidation.
aslation.--There appears to be some difference of legal
opinion as to limitations in respect of consolidation or mergers under
present laws. It is agreed that a clarification of Congressional
intent would be desirable and that any merger of international companies
now in competition probably would require specific legislative exemp-
tion from anti-trust law provisions,
Company officials said they believed that mandatory legislation
is unnecessary, is not in the public interest, and probably would be
-
a step in the direction of ultimate Government ownership.
In general, it appears that any legislative action permitting
merger of international record communications companies should contain
protections for the independence of companies desiring to remain-irfaii---
indetendent status, specifications as to protective measures for labor,
and protection from alien control. It should also provide for all
possible economies. Resulting savings should be reflected in reduced
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rates after prOvisions have been made for sufficient earnings to
allow for adequate capitalization, reasonable research and improvement
in facilities, and good and sufficient service to the public.
Savings under Merger.--The major carriers, in 1949, made studies
of their facilities and operations to determine those facilities which
would be in excess of the industry's requirements in the event of a
merger. A review of these studies indicates that where duplicate tele-
graph cables or radio transmission and receiving equipment were opera-
ted, the oldest facilities were to be abandoned. Where the companies
operated competing branch offices at particular points, these would
be combined into one office,
The faeilities which were determined as excess in the event of
merger had a gross book cost of $13,279,000 for cable plant and
$6,471,000 for radio plant._ The gross costs less depreciation were
0,752,000 and $2,753,000, respectively. Combining the facilitis__
of various companies would involve some expense in consolidating
offices and combining cable and radio circuits into one location in
order to make possible further savings in operating cost.
The engineers discussed the combining of facilities with repre-
sentatives of the principal companies which would be involved in a
_
merger and were assured that the capacity of the merged facilities
would be sufficient to handle any annual volume of business which the
fndustry might reasonably expect in the future up to 800 millions of vordtJ.
It was further explained that recent developments in the industry would
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permit an increase in capacity of about 50 par cent in the cable
facilities and two or three times the present capacity in the radio
facilities. The additional investment required for these increases
in capacity would be relatively minor.
The companies also made studies of the personnel and the amount
of operating expense necessary to staff and operate the combined
facilities propirly. Estimates were prepared of expenses for con-
ducting operations and maintenance of the cable-and radio facilities
--and for general and administrative expenses. These estimates involved
the projection of the expenses of the individual companies as now
constituted and a pro forma estimate of the merged expenses. The
difference between them indicated the savings to be realized from a
? merger of the industry. The annual savings that might be anticipated,
as estimated by the companies, if the industry were merged, are as
follows;
Company Estimates of
Annual Savings from Merger
Conducting Operations Expenses:
Cable -
Radio
? Amount (in
thousaaid
$ 1,464
2,633
Maintenance and Repairs Expenses:
Cable 678
Radio 540
General and Administrative Expenses; 1,565
Total $ 6,880
The estimated savings resulting from the proposed merger were based
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on a volume of business ranging from300 millions to500 millions of
words annunlly. However, since the facilities provided for a merged
?
operation are stated to be adequate to handle a volume of up to 800
millions of words, there should be no necessity-for any additional-
-7-2---facilities to handle the increased volume of business indicated by
the engineers' study of future prospects.
It follows, therefore, that the savings expected from a merger
As estimated by the companies in 1949 took into consideration all
expenses of a fixed or basic nature that might be eliminated by a
merger. Thereafter, if the volume of business increased, any addi-
tional expenses would be of a variable nature and would be substantially
the same in either a merged operation or an individual company operation.
The engineers did not make any independent estimate of the savings
that might be realized from a merger of the several companies, nor was
a detailed study made of savings estimated by the companies. However,
a review of their working papers indicated that consideration was
given to all of the principal factors involved in the merger. The
methods and bases used in making estimates were sound and tho roaulto
seem reasonable. There are, however, certain observations applicable
to the companies' estimates which are discussed below. -
Since the companies estimates were prepared in 1949, there-has
been an increase in wage rates. This would mean an increase in savings
from merger over the original estimates. The extent of the wage
?'inorease in relationship to wages paid at the time the merged-Simings
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were computed could not be determined without an exhaustive analysis.
A review of the operating expenses of the five major companies in the-,
. -
years 1949 and 1950, however, indicated that there had already been
a substantial reduction, particularly in salaries ax wages. Such
savings may be attributed to modernization of facilities, devaluation
in foreign currencies, and some
attributed to savings resulting
savings in this latter category
economies of the sEime nature as those
from a merger. To the extent that
have already been made, they could not
again be realized in the event of merger but would tend to offset any
increase in the savings as a result of wage adjustments. It is also
recognized that among the parties to the merger, there are certain
differentials in wage scales. In order to place all employes on a
4,0*
uniform basis, the tendency would be_to increase some wage rates, which
would reduce the indicated savings resulting from a merger.
The companies' estimates made no allowance for savings in depre-
ciation expense. It is to be expected that if facilities were to be
reduced, there would be a corresponding reduction in depreciation
expense. However,- it is recognized that in the event of merger, some
arrangement would have to be made with the Federal Communications Com-
mission to amortize the amount of abandoned facilities. Since any
estimate of such an arrangement would be largely conjecture, no adjust-
ment of depreciation expense has been made.
The companies, in their estimates of savings, did not give any
condideration to changes in pension expenses. Discussion with the
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company representatives led the engineers to conclude that the current
pension plans of the individual companies are not comparable. In
the event of a consolidation, a uniform pension plan would have to be
adopted for the new organization. It is possible that the existing
plan which is most favorable to the employee would have to be adopted,
and this would tend to increase pension expenses. However, the reduc-
tion in the number of employes as a result of merger would tend to
decrease the overall pension expense. It is also recognized that the
reduction in the number of employes would reduce the amount of payroll
taxes, which also was not considered in the companies' estimate.
From the foregoing discussion, it will be recognized that an
independent estimate of the profitability of a merger would require a
detailed and lengthy study which was not indicated for the purpose of
this survey. It was the opinion of the engineers that the savings
resulting from a merger as estimated by the companies were reasonable
as applied to conditions existing in 1949. The engineers felt that the
net effect of the offsetting factors discussed above and changes in
conditions since 1949 would not materially alter the companies' esti-
mates and that such savings therefore could reasonably be applied to
projected levels of operation.
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' Es:bAppp...,of,.guture Business
The method used by the engineers in preparing their estimates
of future business for international record communications systems
included statistical studies and limited customer survey. Statistical
studies were made to determine whether any economic indicators could
be found that parallel the curve of international telegraph revenues
In the past and hence might be used to estimate the revenues in the
future. The customer survey was made to find out whether customer
policies might materially alter the present pattern of distribution
of rapid communications and thus affect the estimates established by
the statistical method.
The engineers felt that as the actual users of telegraphic ser-
vices determine the volume, of business, their reactions would establish
the pattern for the future. .Accordingly, the customer-survey. sought
to find out the conditions under which the various types of rapid
communications are used, as well as any indications of intentions to
use cables and radio to any greater or lesser extent than in the past.
This survey was conducted by interviews with responsible persons
in 35 companies in 12 different i.ndustries. The aggregate cable and
radio business done by these companies amounts to about $2,4000000 per
year, or 7 per cent of the total public outgoing cable and radio revenues
in the year 1949.
41(
The extent of the survey was limited by the time available but
the unusual uniformity of the responses indicated that a pattern of
ansArs had been established and that it was unlikely that more,
-'? -
BESTRIGTQ
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TRADE (BILLIONS OF DOLLARS)
4. era co ZS
1
? Total
1
United
1
States
CI) REPORT
_
Foreign Trade .
I
S President's Communications Policy Board
n Washington, D. C. ,
/0=2
2 INTERNATIONAL TELEGRAPH VOLUMES
8 L 6-
AND
2 UNITED STATES FOREIGN TRADE
c c
0 fork- 311acon S. ttavie
?
1
D fitghlesse
4 i
(13) Total Words
.44.... 1.1.41 ?404.111
,
4.4141144440
C:21
cc
--?-**:%"......"'
1 -
0
_
! ,
I I . ,
_
.
/
1036 38 40 '42 '44 46 ' 4 8 1 . 9 5 0
1 0
3 f
.
MI
III
2 0
W
0 Foreign
Total
Uni
Trade
ed States
? Less
hAlill
Aids
iiii
,jj
Estimated
Total
United
States
Foreign
Trade
in
Z
0
---J
0
r
all
IIII
LA-
u_ 8
0
im.
Ilk
PSI
11111.1111.
0
2.-
daladnial
Pliill
Estimated Total Words
c.r)
a
G L.
2 6
Efilliaraffillilill
11111.1
-
iiiiiME EMEllin
Li
o
01
W 4
0
<
ill
um.
Ilr11111
P12
Illiallinalailiteriarl
II
Estimated
Public
Words
Z
D
4 =
-
cn
0
imind......
Public
Words
-
------__
cc
0
.
ITIIITIMIMMI
pr
p
?
?
II
1
( . .
IA
-
.
.
w.
, , 52 ' Sc -
? / 44 ,
Me 0
... T.,_. , ... _
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interviews would materially have changed the picture.
226.
Statistical Indicators.--Tho engineers tested several statistical ---
--,-.
indicators to determine their correlation with the volume of telegraph
business. Among these, they investigated the possibility of using
the volume of foreign trade (total of United States imports and exports)
as the indicator ofgvolume in international record communications. To
test the accuracy of this economic indicator, the engineers examined
the relationship of the volume of words (total of incoming and outbound)
- and the volume of foreign trade, not only for the world as a whole but
for various areas of the world separately and for certain individual
countries. In some instances,- foreigh trade with particular areas__
-- varied considerably from foreign trade with the world as a 'whole. It
was found that, in general, there has been a similarity of trends between
the volume of foreign trade and the volume of cable words not only for
the world as a whole but for the various areas studied. While other
factors than trade do, at times, affect the volume of words, foreign
trade evidently has had the predominating influence on it.
The relationship of United States foreign trade with international
telegraphic business is shown in the accompanying chart by the lines
A and B. It will be noted that although there is a general similarity
of trends, the correlation is not very close during the period 1941 to
1947. During the war period 1941 to 1945 the normal relationship between
the volumes of words of public messages and other messages, including
GoOrnment and press communications, was distorted. Normally, public
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words account for about 85 per cent of the total words, but in 1944
the public words dropped to a low of 37 per cent. Government words
increased from the normal of about 4 per cent prewar to better than
30 per cent in 1944, and press words increased from a normal of about
10 per cent prewar to about 20 per cent in 1944. The remaining 13 per
cent of the word volume in 1944 included "miscellaneous" messages, a
viat,
low-rate classification used during the war for personal messages by
members of the armed forces. In the first half of 1950 the percentages
resumed the prewar pattern, i.e., public messages were 84 per cent,
Government messages 6 per cent, and press dispatches 10 per cent of the
total words.
Lumaptions.--The projection of volume and revenue into the future
involves making assumptions as to conditions that may prevail. The
future trend of the indicators of volume and revenue can then be esti-
mated. For this purpose, the Department of Commerce supplied estimates
of U. S. imports and exports over the next ten years on the basic of
assumptions made by the engineers. Among these were the probability of
continued tension in the international situation through 1951 with no
outbreak of large-scale hostilities, of a gradual decline in military
expenditures beginning in 1953, of normal growth in gross national
product after 1952, of no general economic recession during the decade,
and of an immediate spurt in stockpiling of imported critical and
strategic materials, with the purchases falling off rapidly after 1952.
AssAptions which, in view of current conditions, the engineers felt
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were equally conservative were made with respect to exports from the
United States.
Future Volume and Revenues.-- In the field of international record
communications, the preponderance of revenues is directly related to
the number of words. The engineers therefore used words as representing
the measure of volume of business.
Starting with 1950 conditions, the line for public words (Line D
in the chart) was extended parallel with Line 0 to arrive at estimates
of the volume of words for the short-range period 1951 to 1955 and
the long-range period 1956 to 1960. The level of public words was then
raised from 84 to 100 per cent to determine the volume of total words.
On this basis, it was estimated that the average volume of words during
the short-range future would be of the order of 540 millions of words
per year and for the long-range would be of the order of 565 millions
of-words per year,.
Multiplying the estimated volume of words by the average rate
? of 8 cents per word the engineers concluded that the transmission
revenues of the international cable and radio companies for the short-
range period will be of the order of,$43 millions per year and for the
long-range period will be $45 millions per year, as compared with 1949
revenues of about $36 millions.
Estimates of Future Froqtability.--The estimates of future pro-
fitability of the international industry, based on the operation of
the 'barriers as separate corporate entities were made by the engineers
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for the groups of major and smaller carriers.
The estimated international message revenue was allocated to the
two groups on the basis of the average of the actual distribution of
this revenue in the year 1949 and the first nine months of 1950. This
resulted in an allocation of 90 per cent to the major carriers and 10
per cent to the smaller carriers. To the message revenues thus allocated
were added the estimates of other revenues as they applied to the two
groups.
The estimates of gross revenues for the major and smaller carriers
for the short-range and long-range periods were as follows:
-
_Estimated Gross Revenues
Interngional Industry._
-(Tgudandd-of. Dollars)
? Short-range Long-range
.AYME11.9.21:. - Average Year
Major Carriers
- 38,880
- ,
International-Message:Revenue.-
Other Revenues
Total
...2.1210
46,090
PmAlloESZErlsta
International Message Revenue
4,320
Other Revenues
? 1.797
Total
6.117,
40,680
7,210
47,890
4,520
2.J.27
6.317
The estimates d-future profitability are based on the above esti-
mated gross revenues to which have been applied estiwated revenue de-
__
ductioAs and other income account items. Actual totals for the year
1949 are included in the following estimates of future profitability of
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the two groups of carriers, for purposes of comparison:
Estimated Future Profitability
nternatiotry
Thousands of Dollars
12.10-19arrie
230.
Estimated
Short-range Long-range
Year 1949 Anzaatt_har. Average Year
Gross Revenues
Net Income before
Income Taxes:
- Amount
Per Cent of Gross-
_ Revenues -7
40,626
828
2.0%
46,090
5,966'
12.9%
PmQ1ler bgriul
Gross Revenues
5,283:
6,117
Net Income before
Income Taxes:
Amount .
309
1,164
Per Cent of Gross
Revenues
,e8%
19.0%
47,890
7,308
15.3%
6,317-
1,307
20.7%
The engineers also ?imputed bases for measure of income, to which
the estimates of profitability of the international _industry were
related. This relationship of net income to the bases of Measure Of
inoomcifor the major and smaller carriers for both the short and long-
range period6 was as follows:
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231.
Measure of Actual and Estimated Income
International Industry
(Thousands of Dollars)
Ltior Carriers Year 194.9
Estimated
Short-range Long-range
.Average Year Average Year
Basis for Measure 56,596
Net Income before Income Taxes:
Amount 828
Per cent of Basis for Measure 1.5% ,
alglat...11=1,a2
58,369 58,618
5,966 7,308
10.2% 12.5%
, Basis for Measure
8,240
8,988
9,164
Net Income before Income Taxis:
Amount
309
1,164
1,307
Per cent of Basis for Measure
3.8%
13.0%
14.3%
General Observations
It is clear from what has been set forth above that the privately
owned U. S. international telecommunications network is an invaluable
asset to this country in peace and an indispensable military facility
in time of war. During the early part of World War II, this network
was almost the sole means of linking the U. S..headquarters with its
forces overseas. During the war, of course, vast additional networks
had to be created by the military services.
At the end-of the war, those private facilities which had been
tal*L over by the Government were returned.to their owners and a portion
of the Government network was dismantled. What was left of the Govern,-
mentrbuilt net, however, is still a substantial communications facility,
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and this facility is now to a considerable extent competitive
with the private systems. That is, Government-owned facilities
built for military purposes are now used by both military and
non-military Government departments for administrative and other
non-security traffic which might be handled by the common carrier
companies. Faced already with serious economic problems these
carriers are now faced also with a Government-owned competition
which handles much of the business of the carriers' biggest customer--
the Government itself. At the same time, it is to the Government's
own best interest?to see that the private carriers remain strong,
for their facilities may be needed again in time of crisis. Indeed,
they are needed now.
? The President's Communications Policy Board can hardly enunciate
a formula which will at once solve for all time this critical problem.
For the problem changes from year to year, almost from day, today.
It must be under continual surveillance and Government policies
and practices must be flexibly adapted to meet changing conditions.
What has concerned us is that there is no adequate mechanism for
dealing with the problem, for examining its nature, or for evolving
solutions. For example, Federal agencies now decide for themselves
at something less than top level which portion, if any, of their
overseas traffic shall be handled by private or by Government facil-
ities. And these decisions are based entirely on considerations of
convenience, availability of circuits, or apparent cost and certainly
nbt on consideration of how their actions may affect the health
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or even existence of the private carriers.
We believe the Government must have a mechanism ROr keeping
under continual review the way in which privately owned international
telecommunication companies are affected by Government policies and
'procedures. The Government should adopt the general policy that it
will seek in every feasible way to follow such procedures as will
maintain the health and strength of the common carriers. The Govern-
ment should avoid, within limits set by national security, such pro-
ea:lures as weaken these carriers.
Urgent recommendations have been made to Congress that legisla-
tion be enacted to permit companies in the international cable and
radio field to merge. One of these recommendations calls for one
- - -
company to handle all American domestic and international record com?
munications, thus providing an integrated system.
The Board finds no urgent or imperative reasons calling for an
immediate merger of these companies; we conclude, on the contrary,
:that recent improvements in the profitability of these companies
encourago-a-continuation of their present independent status. More-
over, in our judgment,- a period of partial mobilization is not a.
good time to unclertake a reorganization of these important components
of our communications system.
Our conclusions in regard to merger are based on conditions as
now find them and can project them.- We believe, however, that the
situation can change and that the welfare of our national communica-
tions system demands constant attention to the-dendition and stabiliW-
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of these companies. We recommend that the Telecommunications
Advisory Board, proposed in Chapter V, take this as one of its
assignments working jointly with the Federal Communications
Commission. We are mindful of the strong conviction held by in-
formed members of Congress and others that merger is desirable.
While we believe it in the national interest that such a merger-be
deferred; we, too, recognize that changing conditions may provide
compelling reasons for a merger later on. If so these should be
adequately anticipatpd by the Telecommunications Advisory Board and
by the Congress. The kind of merger which might thus be indicated,
as well as the timing of it, may be dictated not only by economic
forces -but by the wisdom of the Government's own policies vis-a-vis
.sthese companies and by technological developments.. Such technolo-
gical developmenteOn fact)._ may prove to be the conclusive factor
in determining the futureof these companies.
220.1111.02
1, The Government should adopt the policy of maintaining the
strength of the private competitive international communications
system.
2.
There should be a Government agency charged with the respon-
sibility for implementing this policy.
3. Urgent recommendations have been made to Congress that
legislation be enacted to permit companies in the international '
cable and radio field to merge. One of these calls for a single
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company to handle all United States domestic and international
record communications, thus providing an integrated system. We
find no imperative reasons calling for an immediate merger of
these companies; we conclude, on the contrary, that recent improve-
ments encourage a continuation of their present independent status.
Moreover, in our Audgment, a period of partial mobilization is not
a good time to undertake a reorganization of theae important com-
ponents of our communications system. -Our conclusions in regard to
merger are based on conditions as we now find them and can project
them. We recognize, however, that the situation_ can change and that
the welfare of our communications system demands constant attention
_
to the condition and stability of these companies. We are mindful
of the strong conviction held by informed members of Congress and
others that merger is desirable. We have axcertained that interested
Government departments are divided in their views on the subject.
While we believe that the national interest does not at this time
require the repeal of existing prohibitions against merger, we
recognize that changing conditions may provide compelling reasons
.for a merger later on. If so, their anticipation by adequate study
and legislation will be essential. The kind of merger which might
thus be indicated, as well as the timing of it, may be dictated not
nly by normal economic forces, but by the wisdom of the Government's
own policies vis-a-vis the companies and by technological develop-
wnts. Technological develOpments may in fact prove to be the
conclusive factor in determining the future of these companies.
* * * *
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CHAPTER V
GOVERNMENT ORGANIZATION
Our study of each of the main telecommunications problems to
which we have addressed ourselves has led us to a single common
conclusion: The United States Government must strengthen its organ,, -
ization to deal on a continuing basis with teledommunications policies
and problems
In our study of the problem of scarcity of space in the radio
spectrum relative to increasing demand, we found an enormously
complex problem-of frequency management. The Gaiernment is trying;
to cope withthis problem by dividing responsibility forfrequency
assignment between the Federal ComMunications Commission and the
President,. and:thus-establishing A dual system of control over a
'single physical entity.
- In our study of the problem of the relationships of Government
communications,activities.to non-Government activities, we again found
divided responsibility and a lack of conprehensive assignment,pf-
authority to deal with the problem as a whole.- Nowhere did we find
isthra;g0PPYor?system of collaboration among existing Government agencies
dealing comprehensively and continuously with policies or integrated
" vecution of Government programs affecting non-Government telecommun-
ications activities.
In our review of the question of merging the overseas operations
Of our commercial telecommunications companies, and in our examination
a health of these and other commercial
Aftfrckrettikrc* health of
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telecommunications carriers, we were struck first-by the lack of
economic and technical information on which we could base 4 sound
conclusion. Although we decided, on the :basis of the facts and
testimony we were able to collect, that no Government action need
be taken now to assure the financial soundness of these activities
? for-the?immediata_future,_we arrived at thestrohg conviction that the.
-Government needs to strengthen its existing organization to keep a-
breast of economic, technical, and other data affecting the health
of commercial telecommunications carriers so-that-helpful.ineasures_sazi---
be taken promptly whenever conditions require them.
-In our efforts to discover the current state of Government
telecommunications 'policy as preliminary to recommending needed steps
toward a total national communications policy,, we once more encoun -
tered dispersion, confusion, gaps, and deficiencies in the product
performance of those agencies charged with telecommunications
policy responsibilities.
Since our appointment,--the nation has passed into a state of
national emergency, and our Country faces deepened crisis and
heightened threat of war. Thus rd examined the problem of the need
for appointment now of a Board or Administrator of Defense Communi-
cations, to exercise the Presidentts powers over tha_nationts tele-
communications system, public and private in the interest of the
natio s
hal edtrity. Again we concluded that neither existing organi-
_
zations, nor the creation of an ad hoc organization like the Board
of War GoMmunipations-, would suffice. We suggest that the permanent
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agency we describe below, headed by a board, or, by a single indi-
vidualtcan discharge these responsibilities*
During the past year we have become aware of the possibility of
radical technical developments which may affect fundamentally the
economics and the engineering of our present telecommunications
system particularly in the internationalV field. It is impossible
for us to foresee the specific impact which these developments may
have. But we are more than ever convinced that the Government re-
quires a strengthened telecommunications organization to keep such
ddvelopments under constant review.
Both the present and the potential threat of unfriendly.inter-
ference to international communications underline the urgency of the
..need for this strengthened organization.
kimand9aLs.t.142.2ttlaol-
The telecommunications field is one affected with the public
interest.
Telecommunications by_wire have long been regarded as such a
business and. therefore appropriately subject to regulation by pub-
ho authority.
Telecommunications by radio fall even more clearly into this
class, since the basic medium they use for the transmission of
lies in the public domain*
'Madre- has presented the inhabitants of this world with what
uAd to be called the "ether, the medium through which radio waves
of al; frequencies are propagated. _Like the air we breathe, the
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not enough of it to accommodate all claimants. Everyone who uses a?
portion of the radio frequency spectrum automatically excludes others
from-using this same portion at the same time, unless the other po-
tential user is far enough away_geographically to cause or suffer
only tolerable interference. Since impulses -of certain frequencies can
be. sent by low power half warlaroundthe certhi the:conflicting in-
terests of .peoples in'all nations of the earth, as well as of all
those within a single nation, must somehow be brought into harmony.
Otherwise there will be chaos.
?Clearly it is a responsibility of every government to manage__
this world resource, this element of the public domain, in such a
way as to maintain an ordered use of the radio spectrum by its own ,
citizens. Each government must also reach agreements with other
,governments for equitable sharing and mutually compatible ,use of
this world resource.
?
The Government of the United States has recognized these
responsibilities for many years, and has from time to time estab-
lished a succession of agencies to deal with various aspects of this
problem. But as the use of the radio spectrum has grown, as the
Government has itself become a major user, and as other nations
of the world have sought a larger share of the spectrum, the problem
has outgrown the authority and capacitY-of existing Government agen-
cies to deal with it.
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What are the major issues arising out of the problems and
responsibilities the nation now faces in utilizaing its telecemmuni
cations resources?including both wire and radiO?which existing _
agencies are admittedly not equipped to handle? We have found five.
1. How shall the United States formulate policies and plans for
-guidance in reconciling the conflicting interests and needs of Govern-
ment and private users of the spectrum epacethat-is, for guidance
in making the best use of its share of the total spectrum?
2. How shall the United States meet the recurrent problem of
managing its total-telecommunications resources to meet the changing
demands of national security?
3. _How shall the United States develop a national policy and
position for dealing with other nations in seeking international
telecommunications agreements?
4. How shall the United States develop-policies and plans to
-festre011esoundness and vigor of its telecommunications industry in
the face of new technical developments, changing needs, and economic
developments?
5. How shall the United States Government strengthen its
organization to cope with the four issues stated above?
The first four of the questions require brief explanation.
I. e?oncilix U es f. _POO ? This task--which is
known as'fi*luOricy management---is one of enormoustechnical complexity,
Different portions of the spectrum have radically different propaga-
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Some aro usable forlong-distance and others only-for-short-haul__
purposes. - Their efficiency also changes from night to day, and from
day to day, and is affected by atmospheric conditions and by sun spots.
Technical advances in the art alter the degree of possible use of a
particular band. The difficulties inherent in these facts are aggra-
.Acta.,tecl,..by the increasing congestion of -certain spectrum bands.
By better management of the spectrum, much more could be done
with frequencies now available. There is opportunity for more effec-
tive sharing of frequencies, for more intensive use of individual
frequencies, and increased economy in kilocycles assigned to each
, circuit. Sharing includes division both of time and of geographical
area. Frequency-conserving practices call for use of the most effi-
cient and stable receiving equipment available Compatible-with_
economic soundness.. These in turn permit smaller allocations of
.spectrum space to accomplish given tasks.
The assignment of -space in the spectrum among private users
including stateand local but not ?Federal-Government agendieb) is
a responsibility of the Federal Communications Commission (FCC).
The total amount of such space available for assignment, however,
is not determined by the FCC.. In effect, it is determined by-the
'?k
Tresident, who is responsible for he assignment and management of
'those 'frequencies used by Federal Government agencies. Tho Inter-
Anartment Radio Advisory .Committee (IRAQ) is the instrumentality
through which frequencies are assigned to Federal users. Thus fait
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no national policy has existed to clarify this dual control of a
single resource and thus to aid in governing the apportionment of
space between private users and Government users as groups. No cri-
'teria have been established for use in choosing between the conflict-
ing needs of a Government and a private agency.
2. lialloal_agglaty. In the present period of recurrent
,crisis, it is likely that we shall be faced with a continuing problem
of adjusting the use of telecommunications?especially radio frequen-__
?,cies--to what may be violent fluctuations in the requirements for
national security. Indded, we may face a situation in which the
President's emergency powers to control, take over, or close down
communications facilities will have to be invoked, and arrangements
for the delegation and exercise of those powers will be essential.
We may alsobe faced With the necessity of creating wholly new
telecommunication facilities.
Telecommunications of course play a major role in the economic
and cultural' life of the nation. They are the vital nerve:system
of our modern military establishment. Since spectrum space is de-
monstrably insufficient to meet both the full needs of 'national se-
curity and the full,needs of other affairs, the latter must give way
to the former in time of emergency. When the emergency has passed,
frequencies and facilities,must be restored to civilian use. To.
create an ad hoc agency to meet each crisis as it comes would be a
clumsy expedient at best, and indeed, the problems of transfer and
retransfer of spectrwri iTace and of facilities for using it are too
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? complex for ad hoc control to be adequate, A continuing mechanism
is needed fer the foreseeable future.
Internjtionljesumptal. Just as the United States has
no clear policy for dividing its share of spectrum space, so it has
Lacked satisfactory means of determining policy as a basis for nego-
tiations with other nations for the world division of the spectrum.
The United States, in.preparing,positions for international negotia-
tions -has in effect asked Federal and 'otherclaimants to-state-their
needs, and then presented the total asthe United States requirement.
:In those portions of the spectrum where these totals have been small
enough to fit within the world complement our delegations to con-
ferences have had 6 negotiable position,- In some oases, however, the
.L.,:_tetal stated requirements have exceeded not merely those which could
reasonably be put forward as the proper United States share but have
'actually exceeded the total physical content of the bands-. Further-
:mere, there is no permanent, mechanism by which the stated requirements.
.of the United States users could be adjusted with equity and safety.
The imperative need for' means of making such adjustmentshardIy
requires elaboration.'
ihlataialag_a4241.1411It4. The prtvate, tel,p6ommunica-
tions.industry of the United States., is one of the nation's most
'valuable assets in peace or in war. The normal life' of the country
is supported and facilitated-by it in numberless ways.
N
times, the industry can place at the disposal-of-the natiO-Itaqarge
In abnormal
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reserve capacity, built up because4bf,its competitive structure.
This capacity helps to take up the immediate surge of military
requirements. The industry can release radio frequencies, cable
capacity, and other communications facilities, when required for
Government purposes, without seriously affecting its ability to
carry the civilian load.
It is essential that the industry be in sound economic condi-
tion. Some of its components, however, have faced serious diffi-
culties. These have arisen in part from changing economic conditions
and from new technical developments, and in part from the varying in-
ternational iituation. The Industry also has objected to practices
and policies of the Government, such as taxation policies, subsidies
to competing facilities, and the Government's increasing extension and
w.kw
use of its own communications system. To meet those difficulties,
the companies have from time to. time taken individual action, and
from time to time Government has ben .of assistance to them in rate
,adjustmenta and other ways.
But there has been no long-range study of the question, no
long-range planning. There should be. No agency of Government is
in a position to take a comprehensive. view of the problem. .Regula-
tory authority over all communications common carriers in inter-
State commerce, wire .or radicyis centered in the FCC. However, the
FOO does not have power, for example, to.require Government agencies
to make greater use of private facilities, or oven to investigate
whether, such 'transfer of traffic would be feasible or desirable, from
thefl Government's point of .view. There is no agency qualified to' advise'
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the Prosident,in fields where the interests of private and Govern-
ment telecommunications users are in conflict. Meanwhile, in the
absence .of guiding policy, the action of Government agencies could
seriously handicap the industry,
In addition to these special problems which are directly con-
corned with telecommunications policies and programs, it is feces-
sary.to keep in mind the fact that these policies and programs do not
exist in a vacuum; they are part and parcel of the policies and oper-
ations both of the Federal Government and of the political, economic,
military, and social lite of the country as a while. Therefore we
must take into account, in estimating the dimensions of the problem
before us, the point that telecommunications policies and programs -
must not be considered as entities in themselves. They should be
constantly related to the larger whole of which they are part.
One further fact is important in understanding this problem.
' All Federal Gevernment agencies have 'interests as users of tele-
communications. The degree of user interest varies; the most promi-
nent users are the Department of Defense, the Department of State,
and the Civil Aeronautics Administration. The Civil Defense Adminia7i
tration is vitally concerned with the adequacy and dependability of
"domestic communications. The General Services Administration has a'
threefold interest: as a user, as a providet of long-distance
'0k
communications 'systems to other Federal agencies, and as the con-
troller and manager of telecommunications (subject to certain restric-
k t
tions) for all Federalmencies. The Federal Communicaions Com-
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246.
mission, although not itself a prominent user, speaks in Federal
Government councils for the interest of the non-Government user.
While all Federal agencies have greater or lesser interests
.as users of telecommunications, the use of telecommunications as
such is not a major interest or function of any Ofthem, but is a
tool to accomplish their missions. '
The problem now facing the Federal Government is how to
organize itself to Meet its responsibilities for policy formation
and program execution in the telecommunications field, which will
meet, the four special problems just outlined.
L.artaat-ilraziz-disha
, We turn now to a study of the_existing Government telecommuni;.
cations agencies to determine the extent to which they can cope with -
the problem just stated. In order, they are the Federal communica-
tions Commission, the Interdepartment Radio Advisory Committee, and
. the Telecommunications Coordinating Committee. Their position in,
the intricate pattern of national and4nternational telecommunios;-
tions is indicated.in-the,accompanying ,chart.- In our ist4dy of
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FLOW CHART OF
NATIONAL AND INTERNATIONAL TELECOMMUNICATION AUTHORITY AND COORDINATION
0
co
6
0
CD
CD
X
o 1.--
0 f
0
....i
0
OIGR- DEPARTMENT OF AGRICULTURE
-SUDGET- BUREAU OF THE BUDGET
1AB - CIVIL AERONAUTICS BOARD
- CENTRAL INTELLIGENCE AGENCY
M- DEPARTMENT OF COMMERCE
OSOC-ECONOMIC AND SOCIAL COUNCIL (UN ORGAN)
ACC- FEDERAL COMMUNICATIONS COMMISSION
A - GENERAL SERVICES ADMINISTRATION
IA- INTER-AMERICAN CONVENTION AND AGREEMENT
ICAO - INTERNATIONAL CIVIL AVIATION ORGANIZATION
.1
I
I
I 1 1 I
1 1 1
t --
MEMBERSHIP OF AIR COORDINATING COMMITTEE (INCLUDES DEPT. OF DEFENSE) OF
DEPARTMENT
?
DEFENSE
?J
ICE i,11%.
MILITARY
COM
'
FLOW OF AUTHORITY
FLOW OF COORDINATION
THE
CONGRESS
THE
CONSTITUTION
OF THE
UNITED STATES
AIR
?*COORDINATING
COMMITTEE
PO
BUDGET
STATE
TREAS
FEDERAL
COMMUNICATIONS
COMMISSION
NON >--
FEDERAL
USERS
???
GSA*
NATIONAL
THE
PRESIDENT
J. FEDERAL
AGENCIES I
A
L---_?__J I
? FEDERAL NON-MILITARY USERS
?4-- ?4-- -4--- -4-- -4- ?+---
AGR COM FCC CIA INT JUS STATE TREAS
? ,?I -19-- -11'7- -1- -rt-
- - -
_____ ?
MEMBERSHIP OF INTERDEPARTMENT RADIO ADVISORY COMMITTEE (IRAC)
-
t A
NSRB
L_
AIR
FORCE
INTERNATIONAL
? ICAO I
ECOSOC
A ITU ? IMCO
r-
UNITED
NATIONS
DEPARTMENT I SLS
OF _
STATE
TCC
f A
PREP
? LEGEND?
moo- INTER-GOVERNMENTAL MARITIME CONSULTATIVE ORGANIZATION
INT- DEPARTMENT OF THE INTERIOR
IRAC- INTERDEPARTMENT RADIO ADVISORY COMMITTEE
ITU - INTERNATIONAL TELECOMMUNICATIONS UNION
JCEC- JOINT COMMUNICATIONS ? ELECTRONICS COMMITTEE
JCS-JOINT CHIEFS OF STAFF
JUS DEPARTMENT OF JUSTICE
' NARBA - NORTH AMERICAN REGIONAL BROADCASTING AGREEMENT
PO - POST OFFICE DEPARTMENT
PREP - CONFERENCE AND POSITION PREPARATORY COMMITTEES
AUTHORITY UNDER PUBLIC LAW 152 OVER PUBLIC UTILITY COMMUNICATION SERVICES
OF EXECUTIVE AGENCIES EXCEPT FOR CERTAIN OF THEIR ACTIVITIES.
TBF
CONVENTION
(SUBJECT TO
RATIFICATION)
CONVENTION
REGULATIONS
SPL
-IL
HAREM
IA
2 i
FINAL' ACTS
3
SVC
SLS-INTERNATIONAL CONVENTION FOR THE SAFETY OF LIFE AT SEA
SPL-SPECIAL ARRANGEMENTS BETWEEN ITU MEMBER COUNTRIES
STATE- DEPARTMENT OF STATE
SVC-RADIO SERVICE CONFERENCES
Tea C 47TRANSPORT AND COMMUNICATIONS COMMISSION (UN ORGAN)
Ta TERRITORIAL AND FOREIGN RELATIONS
TCC- TELECOMMUNICATIONS COORDINATING COMMITTEE
TREAS- DEPARTMENT OF THE TREASURY (INCLUDES COAST GUARD)
I - REGION I OF ITO, EMBRACING EUROPE AND AFRICA
2-REGION 2 Of ITU, EMBRACING NORTH AND SOUTH AMERICA AND HAWAII
3-REGION 30? ITU, EMBRACING AUSTRALASIA
PREPARED BY P. C. P 8, DECEMBER 21, 1950.
(PRESIDENT'S COMMU1DCATIONS POLICY BOARD)
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247.
each of these agencies, we have examined_the record and discussed
with qualified observers the basic nature of these organizations,'
their past' record' and their probable adaptability to moot more ado-
quately the exigencies of the present and future. We have been
mindful of the advantages of building on existing men and organiza-
tions; we have no wish to add to the number of .existing Government
organizations unless the need is inescapable; we have-leoked-for-
ways and means of adapting these agencies'so they can more effectively
carry out the tasks we think need to be dime, or done better.
From this, special point of yiew we have appraised each of these
agencieel as a-means of arrivingat our conclusion as to what should
, be done to strengthen Government telecommunications policy machinery.
,The Fedeml_gommunieglons Commiagon
The Federal Communications Commission was created by the Commun-
ications Ant of. 1934 as an independent agency to regulate interstate
and foreign commerce in communications by wire and radio. The Corn-
missions jurisdiction extends not only to private radio broadcasters
and to coMmon telecommunications carriers engaged in interstate and
foreign commerce, but to the communications activities of state
and local governments as well.
The rultimate public policy embodied in the Act is
"to make available, so far as possible, to all the
people of the United States a rapid, efficient, -Nation-
wide, and world-wide wire and radio communications -service
, with adequate facilities at reasonable charges, for the
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purpose of promoting safety of life and property through
the use of wire and radio communication...."
An immediate objective waste secure "a more effective execu-
tion of this policy by centralizing authority heretofore granted
? by law to several agencies and by granting additional authority
with respect to interstate and foreign commerce in wire and radio
The Commission habroad Powers to regulate common carriers
engaged in interstate or foreign communications activities, and
radio broadcasters. The Commission enforces. those provisions of
the Act which require ships to carry Specified radio equipment end
comply with procedures foi? safety,a Seat The CoMmission carries out
:the necessary inspections and investigations; and can compel actions
Thy:thOSs,it regulates to conform to the 'broad purposes of the Act.
The Act provides sanctions and empowers the courts to enforce Com-
mission decision's.
The Act also specifies elaborate procedural
provisions, designed to afford appeals to the courts toany'party .
,who is aggrieved by a Commission decision, or whose interests are
affeated thereby. These provisions for due process of lawl.these-
Alrotections against arbitrary or capricious aovernment action are
necessary elements Of the. Commission's concept-and conduct.
22/ ?
ComMunications Act of 1934 as amended
=Ma=
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The Communications Act was passed with the intention of
centralizing in one Agency the task of viewing non-Federal Government
communications as a whole, of developing communications policies.
for wire and radio on an integrated basis, and of providing for _
regulation of specific forms of communication with duo regard to
the effects of particular actions on other forms of communications.
It was recognized this was a technical field in which Congress could
not hope itself to carry out the quasi-legislative process of rule-
making, or the administrative process of applying the standard of
"public convenience, interest, and necessity" to numerous specific
cases. Those provisions of the Communications Act which require the
Commission to study special problems and recommend legislation to
cure them explicitly reflect the intent of Congress to give the Com-
mission special policy-forming responsibilities for telecommunications
matters.
As such, we considered carefully whether the Communications Com-
mission is not an appropriate place to put the functions we have in
Mind.
The Communications Act itself, however, suggests otherwise.
Waigal-g-29.1=1-hatieeh the.P1=4.01-Aa4-V12-Elq. The Com-
municationsAct vests defense powers in the President alone, and
-'divides Government powerto assign spectrum space.. Whiio the pro-
?
amble to that Act recognizes the value of communications to national
defAse, and implies that the Commission has a direct interest in the
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management of telecommunications for defense purposes, Section 606
of the Act clearly vests in the President the power to take over
civilian telecommunications facilities, both wire and radio for
emergency and war purposes. The President need not turn to the
-Commission for any sort of prior consultation or advice before ex-
ercising his powers under the Act. Furthermore, Section 305 of the
Act specifically gives the President the power to assign radio fre-
quencies to?Govornment stations, and specifically exempts Government
stations from the'licensing and other regulatory powers of the Com-
mission when they are operating as such. The Act onthe one hand
provides no standards to guide the President in assigning frequencies
to Government stations; his dotormination'is final. On the other hand,
theAct.places the Commission under no duty to respect the President's
?
?
assignments; either the Commission or the President could start
radio.war by::Assigning'A frequency already in Use to An interfering
user..
'Similarly in the field of foreign relationsl-the preamble to
the Act suggests the Commission should Concern itself with foreign
'relations by including, As part of the Commibbionis broad public
'policy objective, regulation of foreign Commerce in part with An eye
to fostering a rapid and efficient worldwide wire and radio communi-
cation service., Yet it is patent that Congress could not and did not
wish to give the FOC powers in the field of foreign relations which'
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are constitutionally within the prerogative of the President.
This division of responsibility offered ample room for the
Government to get its telecommunications policies and'administra-
tion into serious snarls. Two factors have worked against this.
One is the relatively small need for close coordination between the
Commission and the Chief Exebutive during the early years of the
Commission's life; the other is the spirit of sensible cooperation
which has marked the relations between the Commission in particular
its chairmen, and the President.
The Communications Act was passed at a time when there,wa far
less conflict than there is now between the requirements of the
Government and the requirements of other claimants for radio fre-
quencies-. Technological and economic developments kept puce with
valid demands for frequency assignments) in the main. Expectations
for defense needs were geared to the thinking of the times. The
nation's concept of the size and importance of,its,responsibilities
and commitments in the field of foreign relations was also far more
? modest than now,
Accommodation between the President and the Commission was, how-
eVer, asde facto political result, not a-necessary legal result from
.the powers and structure of the Commission and legislative specifi-
cation of its relationship to Congress and to the Executive. The
Commission, as an independent regulatory agency, does not report to
thekPresident nor need it consult the President in arriving at its
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decisions in actions before it. Members of the Commission are
appointed by the President, with the advice and consent of the
Senate. The Commission must come to the Bureau of the Budget in
presenting its appropriations requests to Congress. The Commission
is subject to presidential power in reorganization and management
matters. The President on tho one hand has issued Executive Orders
affecting the Commission and its participation in Government activ-
ities, and the Commission has complied with them. On the other hand,
the President has been chary indeed about using his budget and
reorganization powers with respect to the Commission. Chairmen of
the Commission have voluntarily taken up many policy matters with
the White House, and the record shows ,a high degree of cooperation
on matters of joint concern
Congressional Interest. Relationships between the Commission and
the President are always conditioned by the views of Congress--and in
,particular of those senators and Representatives who take a special
interest in broadcasting or other communications matters--as to the
proper role of the Commission and the degree of independence from
the President it should enjoy.
Many Congressmen take special interest in matters before the
Commission which may affect availability of nationwide outlets for
political debate, or which may affect communications activities in
their home areas. These interests are largely concentrated in the
fie1cs of broadcasting and television. We take account of this fact'
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- here because of its effect on the Commission's freedom to emphasize
the various parts of its total responsibility under the Communica-
tions Act according to its own sense of their importance or
priority.
Some Congressmen regard the FCC as an "arm of Congress," and are
anxious that the Commission maintain a healthy independence from
presidential influence and control.
Hoovet_gommisalen Viara. The Commission on Organization of the
Executive Branch of the Government (the Hoover Commission) pointed
in 1949 to the dilemma under which the FCC has long suffered: the
FOC has been unable to deal effectively with the work-load before
It because it has not formulated the bread policies to guide its
decisions and thereby 'expedite its handling of cases; it has been
unable to formulate those policies because of the pressure of current
business. The Hoover experts also reported that the FCC has charac-
teristically faced, its tasks by dealing with problems asthey arise,
rather than by conscious policy-makingi planning, and programing
-,for the broad future of communications regulation and development.
ahem Viaa. qany have pointed to the tremendous burdens placed
on the Commission by requirements for hearings and other'time-consuming
processes needed to furnish protection- to the rights of claimants.
. _
The FCC has been hampered in the. discharge or its full regulatory
responsibilities by difficulties in getting funds to make requisite
inspections, special:studies, and analyses of pressing regulatory -
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problems. All these counsels have been urged as reasons why we
should not recommend for Lhe Commission new responsibilities for
critical policy-making tasks, dealing with frequency utilization
both by Government and by non-Government agencies, and treating of
other comprehensive telecommunications issues.
We are also impressed by the fact that no Government agency or
official with whom we have dismissed this matter, including the
Chairman and members of the FCC, has recommended that we expand the
%
powers and staff of the FCC to deal with the policy-forming problems
we think must be met.
Appaisal. The arguments involving excessive work-load, method
of organization, and time-consuming administrativei practices are per-
suasive but not conclusive. The Commission has already taken steps
to reorganize itself in line with the Hoover group's recommendations, _
and expects to complete this process by the end of 1951.
Tho argument of excessive concentration on the problems of
domestic broadcasting and television is even more persuasive, We do
not think that the Commission will ever be free from the persistent
pressures which force it to devote the majority of Commissioners'
time and attention to these portions of the field. The solution of
_dividing the Commission into panels already authorized by the Com-
munications Actl is not a complete answeri.as suggested by the
Hoover Commission report. 'Similar conclusiens were stated in 1949
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by a subcommittee of the SenateCommittee .on Interstate and Foreign
Commerce?' Panel consideration and decision is not Commission con-
sideration and decision. To -organize a regulatory aommission.into
panels according to specialized types of work is to divide what
should be comprehensive attention to the interrelations of communica-
tions problems.
The two most important considerations against placing new func-
tions in FCC, and in our opiniot the conclusive ones, are those.
First,, the FCC in its capacity as representative of the interests of
non-Federal communications agencies, is in effoct_a user. As such,
it woUld never be accepted as an impartial arbiter by, other Federal
'users. Second it would be unWise and improper to give to the FCC the
power to make decisions which affect the ndministration of wtecutive
agencies, or which relate closely both to foreign relations and to
Rept 49, 81st Cong., 1st Sess., Feb. 10, 1949, pp. 2-3.
Despite the provisions of Sec. 5 of the Communications Act, the
subcommittee thought "that adoption of the panel system without
enactment of legislation specifically dealing with the subject is
,not contemplated by the existing law which contemplates that all
decisions must be made by the whole Commission." With respect to
the merits of panels, the subcommittee concluded that litigants had
a right to expect that decisions on matters affecting them vitally
should be made by the entire Commission authorized to-decide such
issues. However, "the Commission must find a method of speeding up
its work and reducing the current backlog of cases, which we are
informed represents as much as 15 months' work." The subcommittee
tade concrete proposals to that end, and recommended reorganization
of the FCC into the three functional divisions (broadcast, common
carrier, safety and speeial services) recommended by the Hoover ex-
:pelts and in process of adoption by FCC.
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national defense. These must be made by the President-.
The Interdepartment Radio AdvisouSemmIttee
: The Interdepartment Radio Advisory Committee was created in
1922 by letter to interested Federal agencies from the Secretary of
Commerce, for the purpose of coordinating the uses of the frequency
- spectrum by the several Government agencies. Thus it antedates both
the Federal Communications Commission and its predecessor, the Federal
Radio Commission. These agencies were brought in on their creation
however, and IC has always been the nearest approach to an in-
clusive body in which the needs of both Government and non-Government
agencies fer, frequency spectrum space could be considered.-
IRAC membership has always included those Federal agencies most
interested in the Use of radio communications. Eleven are now..
:repre'sented: the Department of_Agriculture the Department of the
_
Air Force the Department_of the Army, the Department of Commerce, the
:Federal Communications .Commission, the Department of the Interior,
the Department of Justice, the Central Intelligence Agency, the De-!..,
_ .
:partment.of the Navy, the Department of State, and the Treasury Depart-
ment. The Federal Communicatkons Commission acts as spokesman for
non-Government users (that is, all users net within the: Federal Govern-
Ment; state and local governments must come to-the FOC for frequency
assignments). Other Federal agencies are present pr-represented
, when matters affecting them are before the Committee.-'
)11.1211.LIa&Lits 4 group of.uzaa.
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As such) it has been severely limited in its capacities as a
policy-forming body. The practices and priorities it has generated
have always been restricted to those by which a group of users with
equal rights could get along.
IRACIs most important task through the years has been to serve
as a technical forum in which users could agree on assignment of
spectrum space to Federal claimants, and in which Government users
could inform the Federal Communications Commission of their comments
on proposed C6mmission allocations and assignments of frequencies to
non-Government users. The Commission) as spokesman for the non-
Government users, could also comment on the effect of requested
agsignments to Government users on present or future interests of
other users.
IRACis decisions are incorporated in a Station List which is not
available to the public. This list gives all particulars required
for coordination necessary to minimize radio interference. These
particulars are binding delimitations on the use Of the assignment.
IRAC recommends to the President lists of broad assignments of '
frequencies to Federal users, which-are then promulgated in Executive
Orders. These orders have recognized IRAC by reference, in giving
it power to make interim assignments pending preparation of a new
Exticutive Order,' These orders were expected to be issued once
every two or three years; nothing is fixed about this period.
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However, the latest order appeared in 19440 and there ie little
prospect for a new one in the near future. IRAC, or in effect
its sponsoring agencies, has given higher priority to other tasks.
Itablam_a_Tag. Theoretically, since, the IRAG "advises" the
President on the 1180 of his power to assign frequencies to Government
- users under the Communications Act of 1934, an appeal can always be
made to the President. Practically, such a case Would come up only
if an agency felt that it was denied something so important that the
agency thought it appropriate-to bring its request to the President's
attention. As a group of users representing Coequal agencies, IRAC
has a facto rule of unanimity in frequeney assignment matters. In
practice, there have been only three or four cases in which an ag-
grieved department did appeal to the President. The first of these,
,in 1928, demonstrated the difficulty of trying, to use an inter-depart-
mental Committee of coequal users for generating policy, and re-
sulted in a working rule of first-come first-served, with assignments
to_bo made on .a non-interference basis. Under formal IRACprocedures0
those to whom assignments have been made may enjoy them until they
wish to give them up. Practice again, however, is something different;
Back of the rule of unanimity end absence of compulsion has lain a
--- --
complex process of bargaining and accommodation. New users or old
agencies looking for new assignments during the more recent years
.of frequency scarcity, have had to engage in a highly skilled, technical
1?,
'propeas of searching for combinations of frequency, power, tithe of u80,
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direction and area of propagation, and stability of receiving And
sending equipment in order to. fit new uses into the existing
pattern of operations.
Although there has been no compulsion by directive, all the users
have been under etrong suasion to find mutually agreeable solutions
in order to avoid having to seek decisions ata higher but technically
unqualified level. Furthermere, to the telecamnunications speci-alist
,it is fundamental that the alternative to agreement is chaos.
-
Hence arise8 the technical reconnaissance-and negotiating process
,which takes place between seeking agencies and possesser agencies
' whenever new assignments are sought. Requests usually dome in to
IRAC only after the agencies affected have come to some sort of private
understanding.
We have been tr4d that IRAC never concerns itself with iqpolicy"
and that Government uSers are not required to justify their requests'
:for frequency assignments or their retention. IRAQ has made some
.real contributions to policy,-as for example its recommended prior7
Aties for allocating the spectrum to services which sheuld'underlie
the Unit'8d States GovernMent position at the Atlantic City:Telecommuni-
tions Conference.of 1947. These priorities and policies were not
generated 'however, for IRAQ to follow in dealing with.its own business.'
,Thd, were valuable contributions of technical specialists intimately _
associated with governmental ,operations to the formulation of an
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international agreement.
The extent to which Government claimants must justify their
requests is important to an evaluation of IRAOls role. The key to
the matter is the nature of the group--a group of users, rathef
than an independent judging body. IRAC points to various criteria
which have been decided as relevant to the justification of fre-
quencies in its deliberations:// Whatever the relevance of the cri-
teria, no body of users acting as judge of its own requirements can
taken an impartial view or the requests of its members. Security
problems have complicated these issues, especially in time of war,
when the fact of value to national defense would often be alleged,
. but no supporting data brought forth on which the claim could be
evaluated.
In sum we find that IRAO has done a good technical job of
frequency assignment through the years, within the inherent limita-
.
'Lions imposed on it by its constitution. It has taken advantage of
the incentives to technical achievement and agreement inherent in
its peculiar situation. It should remain as a technical body in which
I/ Bligible reasons include: specific legislative directives;
international commitments, such as treaty obligations; national
defense requirements; internal security; protection of national
resources; essential mobile communications; communications affect-
ing safety of life or property; research and experimental services;
and absence, inadequacy, or impracticability of establishment or
use of other means of communication. See IRAQ By-Laws, 1 January
1950, Article X0 !Trinciples Governing the Assignment and Use of
Radio Frequencies.?
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the day-to-day tasks of Government frequency assignment can be
carried out. It is obvious, however, that a different kind of
agency is needed for the future to nolve the problems that will
arise from congestion of the radio spectrum.
The Telecommunisalipm_psordinatin, Comm1ttp.2
? The Telecommunications Coordinating Committee is an informal,
voluntary group ,created in 1946 by exchange of letters between the
Secretary of State and the heads of four other departments and, the
FederalffigpMmunications Commission. The purpose of this move was to
create a body to consider telecommunications policy questions, and
thus to fill for the postwar period the gap left by the demise of
the Board of War Communications, The Committee is composed of one
representative each of the Departments of State, Treasury, Commerce,
.and of the Federal Communications Commission, and three from the
Department of Defense (one each from the Departments of the Army,
Navy, and Air Force), The Bureau of the Budget is represented by an
observer. 'Representatives are designated by the heads of each
agency; they are supposed to be of the Under Secretary or Assistant
Secretary, level for the non-military agencies and the chief commun-
ications officers of, the armed services. Several efforts have been
made by member departments to set up the organization more firmly
'
by Executive Order. This has never been done, Subsequent to its
formation, other departments have from time to time sought membership
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but have been excluded by the Committee on the ground that membership
is restricted to those agencies having a "high policy"
telecommunications, Tho Committee, as a matter of practice, in-
cludes in its meetings, and in the composition of any ad hoc working
committees, representatives Of any agencies having a special interest
in the work in hand,
outset it was thought this committee could formulate
policies and develop plans and programs which would promote the most
effective use of wire and radio facilitiesi The FCC, however,
pointed to its statutory responsibilities for policy formulation and
advice to Congress on such matters, and stated that its participation
in any group such as TCC could not relieve it of those obligations
or bind it in any way. The State Department reiterated its initial
view that the TOO could work only by.. unanimity, and that there must
bo no intrusion, on the statutory or other authorized responsibilities
of any of the component agencies. TOO accordingly adopted a more
modest charter in which it was agreed by the members that its mission
"The coordination of policies of the various departments
and agencies of the United States Government relating to
domestic and international communications matters...; and
advise on problems of an international nature including pre-
paration for international telecommunications conferences.
The Committee shall act in an advisory capacity only, but
may take final action when specifically authorized by
unanimous concurrence of all Government agencies represented'
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by the membership....In accordance-with the foregoing,
the primary objective of this Committeelis the formulation
of a national communications policy." 1/
The TCC is served by a small part-time secretariat furnished by the
Department or State. Although it has no formally elaborated organ-
ization, it does set up ad hoc working groups.
ProN.emS of TCO. From the evidence before us, and from dis-
cussions with participants, it appears to us that the TCC, in its
present form, is inadequate by itself to play the major role In the
formulation of a national telecommunications policy.
TCC is bound by the rule of unanimity. TCO can act when the
Government departments are in agreement, or can be brought into
agreement by intragovernmental persuasion and diplomacy. TCC can lay
?out the areas of agreement or disagreement on any issue before it,
but since its memborts represent agencies with user interests, the
Committee cannot easily weigh and evaluate points of disagreement,
resolve them, and advise the heads of their agencies and through
them the President, of a national telecommunications policy..
WC is hampered by the difficulties, found in other technical
fields as well, of translating technical differences of opinion
Into policy alternatives so they can be dealt with by the President
or by Cabinet officers, TCC membership has suffered the decline
4,?
2/TCC Document No. 11 Organization/6, April 8 1946.
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inevitably-to be expected when staff officers are unable to master
? this thorny task of translation. Under Secretaries and Assistant
Secretaries have been replaced at meetings by Directors of Offices;
Directors of Offices have been replaced by technical specialists, so
TOO meetings are often conventions of IRAO representatives acting
under different instructions. This situation might have valuable
advantages front the standpoint of continuity of problem consideration
and economy of personnel, if it were not true that technical user-
oriented personnel do not occupy positions which permit them to act
as plenipotentiaries to make,policy commitments on behalf of their
agencies.
?
When the Government after the passage of the National Security
Act of 1947, could have replaced the War and Navy Department rep-
resentatives either by a single Department of Defense representative
or by representatives of the three service departments, the' choice
was for the latter. This meant in practice that TOO is weighted
with representatives ok military interests and,functions, who
besides are chiefs of the communications services of the three
departments--that is, users and operators of speeialized services
rather than officials charged with agency-wide responsibilities.
In most instances, this would have been salutary, since close
relationships between major operational responsibilitr and policy
responsibility are wanted. The difficulty here arose from the fact
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that much of telecommunications policy formation. has to do with
dividing scarce resources among military claimants, other Federal
- GovernMent claimants, and non-Government claimants. Officials
heading extensive service agencies with larger potential demands
on their services than they.can expect to meet, can-hardly,be
? expected to take an impartial view of such questions as the\national
requirement for a share of the worldls frequencies, or division of
the national share among all claimants.
'MC has done good work of a preparatory character toward policy
formation. But TOG as presently constituted has found it difficult
if not impossible to complete policy formation tasks. In those cases
where unanimity does not prevail, TCC could never do so. However,
TCC, better organized and staffed could do a far better job of
preparatory work so sub-Cabinet level members might go farther than
new toward resolution of policy differences, and in any event maim
possible intelligent resolution of remaining differences at the level
of the Cabinet or the Presidency. We believe that reorganization and
strengthening of TCO will make possible'suchia.eontribution:
lbs.palumula.9klm_Ba:gmalwal
The existing .organization for frequency assignment to Govern-
ment and to private users was set up at a- time when--outside of the. .
:Standard .broadcast band?there Was enough for all, and the proportion
of spectrum space needed for Government purposes was small in 'rola-
'Um to the whole. ? In such circumstances it was feasible to leave
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Government frequency administration to the Executive Branch, as a
proper extension of executive control over the substantive functions
of Government which its communications serve; ?to leave assignment
to non-Government users to the Federal Communications Commission as
a proper extension of its regulatory functions; and to leave inter-
relations between the two to good sense and a will to get along.
Government now occupies something under half of the presently
usable radio spectrum and was doing so before the Korean crisis.
Although the Federal agencies have acquired this large portion of the
spectrum under established procedures and with consideration to private
interests 8,9 represented by the FCC as spokesman, these allocations
were made by officials who could not weigh all demands for spectrum
space, Government and private, andjudge them impartially on the
'basis of full explanation according to a Angle set of standards and
a well-considered national policy.
We have found conflicting evidence as to the seriousness of the
.scarcity of frequencies in relation to demands. Some think there is
no problem, and that the expected rate of technical advance, continued
good will among those competing for apace, and the elimination of
wasteful uses will meet the nation's requirements for the indefinite
future. Others think the problem is critical. Without passing
judgment here' as to the precise degree of scareity,_we are convinced
. ,
_ -
thate_pressure:of present and future demands is so heavy as to force-,
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V_
the Government ultimately to consider telecommunications resources
as a whole, and to apportion them as a whole to meet the most pres-
sing requirements of the whole nation.
As for telecommunicatiOns policy formation; recent experience
has demonstrated that the available machinery works only in the case
of unanimity, and that the event of unanimity has become increasingly
rare. Although there was unanimous acceptance of the Atlantic City
-, Convention, unanimity disappeared when attempts were made to translate
accepted policy.into practice. . The United States thus was unable to
devise a reasonable position for implementing an agreement it had
initiated and urged, on other nations. Neither. the TCC nor, any.
spocially-devised machinery has so far beenable te-previde that
detailed position.
.:-.9.9119.111212D;
1. Fundamental changes in telecommunications require the over-
haul of Government machinery for formulating telecommunications policy
_
and for administering certain telecommunications a.ctivities in the
national interest.,
2. The Communications Act 0. 1934 established a system of dual
cOntrol of., the radio freqUency spectrum... This dual-control arises
- largely from the factlhat the regulation of private telecommunica-
tions is a function of Congress exercised through the FCC, while the,
operation of Government telecommunications is primarily a function
of the Executive,. For example, the assignment of frequeneies to mill-
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tary services is an exercise of the President's powers as Comma-
: der-in,-Chief-of the Armed Forces.
-
3. The Federal COmmunicatiOns Commission, though needing
further strengthening, should continue as the agency for regulation .
and control of private users.
4. The President has exercised his power to assign frequencies
through the Interdepartment Radio Advisory Committee, made up of
representatives of the using Government agencies. While this Com-
mittee should continue as 4 forum to arrange the use of the spectrum
in such a way as to avoid interference it isnot inadequate means
'foriteeping,in Order the large portionof the spectrum occupied by
.Government agencies.
5. .The Telecommunications CoOrdinating'GoMmittee has served a:-
uspful function and should Continue .as a mechanism for interdepar
-,mental discussien?of telecommunications matters.
6. The whole: Government telecommunications structure is an
uncoordinated one and will be even less adequate in the future than
it has been in the past to meet the ever growing complexities of
---telecommunications. A new agency is needed to give coherence to the
structure.
7. There is need for a better determination of the division ,
in the national interest of frequency space between Government and
non-Government users. ,TO achieve that end, Close cooperation between
,the Federal_Communications,-Commission and the proposed new agency.
'will be necessary.
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Th2-allYtlon.202MMOdZI
The urgency of the need for remedial steps in telecommunica-
tions organization calls for prompt action.
We recommend the immediate establishment in tho. Executive Of-
fice of the President of a three-man Telecommunications Advisory
Board served by a small, highly qualified staff, to advise and assist
the President in the discharge of his responsibilities in the tele-
'communications field. Its task would include formulating and recom-
mending bread national policies in this field and giving advice and
assistance in the formulation of policies and positions'for:inter-
national telecommunications negotiations.
The Telecommunications Advisory ,Board should exercise on he-
'half of the President his powers in the telecommunications field--
in the main, those powers arising from Sections 305 and 606 of the
Communications Act of 1934. Thus the Board would be responsible
for assignment of frequencies to Federal Government users, and for,
the exercise of the President's emergency ani War powers over the
radio and wire communications, of the country.- This agency would-also
be available to discharge any other tasks the Presidcnt might lay
upon it.
While we believe that a three-man board as sUggested'above is
44
preferable, we reCognize-the possibility of appointing one man, a
'Telecommunications Adviser, to exercise the functions of the proposed
bArd.
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Vie believe that an immediate -task of the new agency would be
to assure that the Federal Government's use of radiofrequencies is
in_as good and economical order as possible and to further the most
rational use of the entire spectrum.
Another closely related and important function of the new
Board will be to establish and maintain effective working relation-
ships with the Federal Communicationa Commission for the informal
solution of those joint questions of frequency allocation which
will inevitably come up under our system of dual control over the
spectrum. The vast growth in public demand for television has made
acute the problems of deciding how to allocate space in the higher
frequency bands as between Government and non-Government users. The
claims of a multi-billion-dollar industry with a tremendous potential
impact on the daily life of every citizen must be put over against
vital needs of Government agencies for services necessary to the se-
curity and welfare of the entire nation. If this cannot be done
promptly and wisely-by joint action of the FCC and the new Board,
it may be necessary to seek a change in the Communications Act so as
to set up a single authority where such decisions can be made.
We recommend that the Telecommunications Coordinating Committee
should be left much as it now is, so far as its legal basis and scope
of activities are concerned. re see no particular merit in formaliz-
ing it by Executive Order; to do so might unduly institutionalize
what should be a flexible informal interdepartmental committee com-
posed'of representatives of those Federal departments and agencies
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to telecommunications. The chairmanship of the TCC should be held
by someone primarily interested in telecommunications. We suggest
he should be a member of the proposed Board.
We recommend that the Interdepartment Radio Advisory Committee
should also continue much as it now does as a specialized agency to
perform the detailed work of assigning frequencies to Federal Govern-
ment users, but under policies promulgated by the Telecommunications
Advisory Board. IRAC recommendations for frequency assignments
should be made to the Telecommunications Advisory Board for authenti-
cation,
We recommend that no changes be made at this time in the powers
and duties of the Federal Communications Commission, The FCC should
continue to regulate telecommunications common carriers and to control
the use of the radio spectrum by non-Government agencies according
to the standards of public convenience, interest, and necessity
specified in the Communications Act. The Commission should continue
to afford to interested or aggrieved persons fall opportunity for
public hearings and other safeguards due process of law.. The
' Commission's present efforts to reorganize itself as recommended
by the Hoover Commission should be pressed, in order that it may
quickly increase its capacity to help in Government-wide formula-
tion of telecommunications policy.
We do, however, think that the FCC Should'have more funds and
, a stronger.staff to keep up with engineering and economic develop-
ments affecting the commercial telecommunications carriers of the
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272.
country. We foresee the possibility of quicker and more radical
change in these fields; we think the Commission should be in a
position to take necessary action without delays caused by the need
to got special appropriations, recruit special staff, and conduct
special studies before sound decisions can be made.
We recommend the creation of this Teleoommunications Advisory
Board after an exhaustive,review of alternative solutions. We be-
lieve that a board acting to advise the President has the best
oppartunity within the philosophy of our Government operation to
set our communications house in order.
We call attention to the one alternative most frequencly sug-
gested--that is, the creation by Congress of a board having complete
power to assign frequencies both to Government and to civilian users,
The creation of such ,a board would mean a fundamental change in the
present Communications Act. It would involve, we believe, serious
conflicts with the proper exercise of the executive function of the
Government.. We mention it only as a possible-last resort in the
management of our communications resources. We hope that the solu-
tion proposed here can obviate the necessity of such fundamental
change in our communications policy.
Shalplotag_i_jziaamalapjL,Adviso_z_milz.-SalrBeeligipatiorzs and
EmlognIgz-High caliber of membership is the most important single
factor which will determine the success or failure of the proposed
Board. The Board should combine sound engineering knowledge with
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experience and skill in governmental affairs. The business of the
Board will not be confined to technical questions of electronics and
engineering; its problems of Government policy and operation branch
out into many fields of public policy. It is therefore important
that the members of the Board should be men of broad vision, able
to resolve complex telecommunications issues with due attention to
, probable impact on related fields.?
Salaries of Board members should be sufficient to attract men
of high qualificatlons.
af....12109DgUalad19,14-AdY.WXY-12=1=1.dall2A,EMati9M-and
yzwita?The Telecommunications Advisory Board should be established
preferably by Executive Order. This agency should:
A. Act for the President in carrying out his responsibilities
arising from:
--(I) Section 305of the Communicationo Act of'1934, as
,amended, (Assignment of frequencies by the. President ,to
Government stations or classes of stations.)
(2) Section 606 of the Communications Act of 1934, as
amended. (Emergency and war powers over telecommunications
eommon carriers, and protection for telecommunications activ-
ities)
The Telecommunications Advisory Board should carry on
sUch planning functions as are necessary to the discharge of
its duties under this Order.
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p. Stimulate and correlate the formulation and publication of
plans and policies by appropriate existing agencies to insure:
(i) Maximum contribution of telecommunications to the
national interest.
(2) Maximum effectiveness of U. S. participation in
international negotiations.
C. Recommend to the President and advise him on proposed
legislation in the telecommunications field.
D.. As preliminary and preparatory steps in the discharge of
the duties specified aboVe:
(1) Approve and promulgate engineering standards for
allocations and assignments to Government users.
(2) Provide for adequate initial justification and
_periodic rejustification and reassignment of frequencies
assigned to Government users.
(3) Maintain such records of U. S. frequency assign-
ments as it deems necessary..
(4) Make arrangements with the FCC or with other agencies
-
for monitoring and check to determine. compliance with con-
ditions attached to frequency assignments, and for other
purposes.
. (5) Keep abreast of research programs in those aspects
of the telecommunications :field which bear on radio propa-
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gation and frequency utilization, and stimulate and support -
research where most needed in these areas by governmental
and private agencies.
.(6) Stimulate and sponsor such studies pertinent to the
broad objectives of the board as are necessary to keep the
President informed of the health of the telecommunications
industry and the effects upon it of Federal:telecommunica-
_
tions polidies and procedures.
F. Cooperate with the Federal Communications Commission for
the purpose of arriving at an equitable dibtribution Of frequency
_space between.GoVernment and non-Government users.
G. Establish and maintain liaison as required with departments
and agencies of the Federal Government.
H. Create advisory bodies, or utilize thq assistance of
existing advisory groups, as required in the discharge of its duties
and responsibilities.
I. _Carry on such other duties and responsibilities as may be
directed by the President from time to time.
Luals_io_InforzmIlon:-All departments and agencies of the
Government including the military services and the Central Intelli-
gence Agency, should be authorized and directed to furnish to the
agency whatever information it requires to make a full determination
of the questions before it.
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The Board ,must always be in a position to receive and consider
thd most highly classified matter submitted by military or other
Government agencies in justification of their proposals. Only thus
can it hope to make reasonable judgments based on complete facts.
Obviously, the Board must be in a position to protect such confidences.
a dReationso her Agencio--If the
new Board acts for the President in carrying out his responsibilities
arising from Sections 305 and 606 of the Communications Act it will
have real power. In our view, both of these functions are continuing
functions involving the exorcise of substantial governmental power.
They are the heart of the mission of the new agency.
Section 305 gives the President power to assign radio frequencies
to Federal Government users. This is a power vital to national de-
fense and security. Under the growing use of international tele-
communications for international information, the power to assign
space in a most important medium for disseminating such information
is increasingly vital to peace, security, welfare, and prosperity.
Radio frequencies are vital to the development of, aviation. Radio
frequencies are playing -a larger part than ever before in domestic
security and law-enforcement measures. Because of these develop-
ments, problems of priorities of claims on the spectrum are keener
ik
than ever before within the Federal Government itself. A continuing
agency,-with real Power to assign and review assignments of fre-
quencies toGoverhment users, is needed to set Government policies
ytEsTR IcaL)
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and to supervise the work of IRAC in carrying them out.
In World War_II, Government powers for taking private communi-
cations resources for public purposes in time of emergency and war
were exercised by an ad hoc agency. This solution is a wise one
for periods in which world wars and international crises are for
apart. It is hardly prudent in a period of constantly recurring
crises with the ever present possibility of world conflagration.
Vie are now in a period of national emergency, which may become even
more serious. Plans should be made promptly to see thqt the nation's
communications resources are put to their best usosto meet any emer-
gency in an orderly way; These plans must consider the net benefit
to the nation of leaving communications wholly or partly in private
hands. During emergency or war, there should be constant attention
to the best combination of governmental and non-governmental opera-
tion of the nation's telecommunications.
Needless to say, the exercise of the President's power under
Section 606 calls for advance planning. Obviously no board or sin-
gle person, assisted by a small staff, can do this job alone.
Several existing agencies are charged with related responsibilities
and it will be necessary for the new agency to enlist their coopera-
tion. The Department of Defense and its components the Department
of State, and the FCC must be called on; there must also be close
working with such agencies as the National .Security Resources Board
k
and the Defense Mobilization Administration, The new.agency may
? -
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have to avail itself promptly of its recommended power to set up
advisory or other working groups to cope with its responsibilities
under Section 606.
The role of the new Board in stimulating and correlating the
formulation and publication of plans and policies by existing agen-
cies is of great importance. Our own work has been hampered by the
lack of comprehensive, correlated, and readily available statements
of telecommunications policy. We have encountered examples of the
failure of existing policy machinery to meet the requirements of inter-
national negotiations or of other Government action.
Yet the answer to this lack is not to create an agency spec-
jalized to deal with telecommunications policy formulation. Tele-
communications policy must he integrated with policies and programs
for the full range of Government and national activities. If it is
-elaborated in isolation, it is almost sure to be incomprehensivo or
faulty, and will require reconsideration by other agencies in order
to be correlated with other policies and programs.
Our solution leaves the main responsibility for the elaboration
of telecommunications policy with existing Government agencies which
already must relate telecommunications to other functions for which
they are responsible. The new agency will provide a point for stim-
ulus and correlation which we do not think has been satisfactorily
provided in the past by the Telecommunications Coordinating Committee.
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Since the new Board is also given responsibility for weighty func-
tions in the telecommunications field, we prevent a divorce of policy
formulation from operating responsibility. ?
Our solution implies the following corollary: Existing Govern-
ment departments and agencies which participate in this policy-formu-
lating process must markedly Strengthen their units for carrying out_
policy formulation in the telecommunications field, and in adjusting
telecommunications policy to related policy.
The Telecommunications Advisory Board has been designed to
facilitate formulation of policy helpful in internatibnal negotiation.
If it is to function effectively for this purpose, it is imperative
that the Department of State shall have a strong telecommunica-
tions staff, and our plan is predicated on the.assumption that such
a staff will be maintained'and available.
In approving and promulgating engineering standards for allo-
cations and assignments to Government users, the agency should
direct major attention to setting up standards which will make it
possible for the Government to 'meetits telecommunications needs
with a minimum use of spectrurkspace. The new agency should have
several highly qualified engineers on its staff who will work with
, engineers already employed by other Government agencies, toward the
-end that operating equipment and practices be as efficient and
- economical as possible.
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It is highly important to concentrate upon adequate standards
relating to efficiency and stability of equipment, minimum separation
of frequency assignments, and sound circuit engineering which relate
theload to the band width and number of frequencies necessary to
do the work, if maximum use of the spectrum is to be achieved under
standards of minimum harmful interference.
_ _
Our suggestion that the agency should provide for adequate
initial justification and review of frequency assignments to Govern.
ment agencies is designed to correct a basic fault in the present
situation: protection to first-comers irrospeetive of the relative
needs of conflicting claimants later on, which results in premature
requests for frequencies. While many factors in the present situa-
tion temper the potential evils of our present system of assignment
to Government users, we are not convinced that the present system
can yield as good results as the country should have. All Federal
requests for frequencies should go to IRAC in the first instance,
where they should be screened for conformity to =rent policies
and for potential interference. Where IRAQ cannot act, conflicts
should be carried to the new agency. One of the most difficult
,problems under this system will be to prevent IRAQ from failing to
settle anything an referring every problem to higher authority.
Every encouragement should be given to IRAQ to settle problems itself.
This calls for firm leadership. ,
We have suggested the new Boardmairtain such records of U. S.
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frequency assignments as it deems necessary. IRAQ now keeps
reasonably complete records of Federal assignments; the FCC, of
non.-Federal ones. However, there is no one central place where -
a complete list now exists. While the new agency should not main-
tamn more in the way of reconda than it needs for its own purposes,
it should take strong steps to see to it that somewhere in the
Government acomprehensive and current record Of7W-S-.. assignments -
is-Maintained. The FCC is the most logical place for this. If lack
of funds or staff block achieveMent-of this purpose, Congress should
remedy it.
We wish strongly to dtress the need for more intensive and 6
prehonsive research on problems of radio propagation and frequency
utilization. In the recent past, critical decisions about use of
the spectrum, including geographical and 'frequency separation of
stations, have had to be made in the absence of sufficient scientific
data.
The Board should not its8lf engage in research; indeed there is
no necessity for it to contemplate such a role. The newly established
National Science Foundation, whose principal concern will be the
fostering of basic research, provides 'one avenue for the Board's
support of projects in this fiold. The Research and Development Board
in the Department of Defense, moreover, is in a position to deal with
problems closely related to telecommunications.
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At the beginning the agency should try to improve the
coverage of research on pressing problems by suggesting research
projects to agencies already equipped to conduct them. Such
projects should include research on propagation in particular seta
of conditions, and forparticular bands of the radio spectrum. -The
board should be represented in the Executive Council of the Central
Radio IPr.opgation Laboratory. If stimulation in the form of funds
is needed, the agency should encourage an existing Government de-
partment to seek such funds and to allocate them or expand them
as executive agent for the particular research envisaged.
If the Board is properly to advise the President, it shon1a
also conduct and stimulate other studies pertinent to the various
phases of its missien.
There is also a continuing tank of connidering-basio Government
policies for the handling of the Government's business with privately
owned communications companies. This is not a regulatory matter
appropriate for the FCC although it has important implications
for regulatory decisions. Government traffic is proportionately
so largo a part*-and promises to become an even larger part--of
private communications business that its terms and conditions can
affect the health, the scope, and the serviceability of private
communications companies. This task involves questions of Govern-
ment economy, of efficiency and promptness of telecommunications
service, of the impact of future telecommunications capabilities for
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defense and for economic progress; it is thus a continuing'qu6stion-
appropriate for the new Board.
The General Services Administration deals on a day-to-day
basis with these questions of telecommunications managomont. It is
our Opinion that GSA should turn to the Telecommunications Advisory
Board in thefirst instance for the determination of those issues
of high policy relevant to the discharge of GSA's telecommunications
' 'management responsibilities.
Inherent in our concept of the Beard and: it duties is the'
borit0.0#94 that the Government has a rcsponsibility-to preserve the
present free enterprise status of the telecommunications industry.
The hoard should be authorized to create if necessary, and to
utilize such existing panels, advisory groups, working committees,
and ad hoc working parties as are required to carry out its respon-
sibilities. It should use, where feasible, the personnel and
services of existing'departments and agencies of the Federal Govern-
ment and of state and local governments on a reimbursable or other
mutually agreeable basis.
-Qnly thUs can the Board take full advantage of existing resources
in knowledge, ikillssand people, and itself remain 4 small organisa-_
While the agency should be small, we recognize that it may
have to take on cortain'operating functions necessary to the full
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completion of its major missions. We recommend it be flexibly
- _
constructed so it can do so if necessary.
It should be clear from the ieregoing that it is our intention
that the new Board should not supplant or encroach upon the rea-
ponsibilities of existing Government agencies. We do not wish to
lessen the normal responsibilities of the Department of State in
the field of foreign affairs; we wish to facilitate the formulation
of national telecommunications policies on which policies and
positions fa telecommunications negotiations can be based) and
thus to fill a gap which the Department has had increasing difficulty
in closing.
??? al= MI
Federal Communications --Our desire is to make the
taskaAof the Federal Communications Commission more manageable and
to take full advantage of its resources. As an independent regula-
tory agency, the Commission bears major responsibility for assuring
to private persons full consideration of their rights, interests,
and claims in telecommunications matters. The courts see to it that
this is done. Nothing we propose will infringe on the Commission's
Twers to assure such procedural protection. The Commission should
remain in this role. Because of the burden thus placed on the Com-
mission especially the Commissioners themselves, we have thought it
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prudent to supplement the Governmentis machinery for ariiving at
comprehensive telecommunications policy.
It is neither appropriate nor desirable to try to put the FCC
in a position to tell executive agencies what are the most important
uses of the radio spectrum. Nor would it be proper for executive
agencies to decide for the Commission how to carry out its regulatory
and policy responsibilities under the law. We know of no neat
solution to this governmental dilemma. We see no reason to reor-
ganize the regulation of privately owned communications carriers,
placing it under the President. The good sense and accommodation
which have marked legislative-executive relations in this field in
the past can be expected to continuo.
If the new Board is to work harmoniously with the Tolocommunica-
;tions Coordinating Committee and the Interdepartment Radio Advisory'
Committee those latter organizations need to be strengthened. The
particular changed -required are discussed i4 the paragraphs that
' follow.
Te'ecommunications Committee.-'-The Telecommuni-
cations Coordinating Committee should work out for itself clarified
.0orms of reference; it should also be authorized to establish
necessary subcommittees dnd special working -groups, and be equipped
with an adequate secretariat.'
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This Committee should remain an advisory and coordinating
body., It should be a forum in which Government agencies possessing
substantial responsibilities or interests in the telecommunications
field can meet in an attempt to work out a coordinated policy in
telecommunications matters arising out of those responsibilities.
In case of agreement, each agency affected can take administrative
action within its own established powers to put agreed decisions
into effect. In case of disagreement, the matter involved can be
Promptly referred to the now board fOr consideration of the reasons
for disagreement and for evaluation of.the probable consequences
for the nation of following alternative courses of action. Thus
in effect the Committee would be a means for taking the first
important steps toward the formulation of a comprehensive telecom-
munications policy; it would uncover areas of agreement and disagree-
ment, permit action in case of the former, and point up policy
choices in case of the latter. The rule of unanimity would no
longer block action, since participating agencies could always act
by reporting their differences.
It is recommended that the level of membership be determined
through the appointments by the heads of those agencies -to be
represented. on TCC. The present membership is supposed to be of
tlib Under or Assistant Secretary level, but it is well known t'..1.2t
those officials rarely attend. One reason for this is the fact
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that rarely if over have problems been well enough prepared so
persons of this level can deal with them expeditiously. Technical
issues have not been well enough translated' into policy choices.
TOO has failed as a top policy organization because of its lack of
substructure.
.Level of membership should be left flexible, and agency repres-
entatives should be as high as necessary to deal with the particular
policy issues under consideration. The Committee needs a competent
and energetic full-time Executive Secretary as well as the power to
create whatever working committees it requires to deal with special
fields or non-recurring problems, With such resources, the Committee
should be able to solve many interagency problems at the working
level, and to reserve for higher officials the consideration of
policy choices which could not or should not be resolved by specialists.
The TOO should consider carefully the merits of associating
? industry representatives' with its subcommittees as observers. The
- ,Air Coordinating Committee has done so with marked benefits. The
Telecommunications Policy Staff in the Department of State should
continue to call on industry advisers to help in preparation of
positions for international conferences. The rbdcreLt-Octmmunteations
? Commission should continue to carry the main load of industry re-
-lat4.6nsh1ps. Other Government departments should continue or 'in-
Crease their efforts where appropriate, to base their particular
-
,planning, and -Operating responsibilities- On-sound industry'
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relationships.
As suggested pbove, the top responsibility for systematizing
and recommending Federal Government frequency assignment policies
should rest with the now board; the Telecommunications Coordinating
Committee should serve as the forum in which spokesmen for Govern-
ment agencies meet to lay out the existing pattern of views. If
TCC is to do this jot completely, it must include within its member-
ship or afford rights of representation to all Federal agencies with
substantial interests in telecommunications.
I119.1a1=amxImpt RaAg_Adyialasplanittag.--The Interdopart-
ment Radio Advisory Committee should be continued as a specialized
working body to assign frequencies to Government users under
paicioa_ promulgated by the new agency. Frequency assignment
priorities have been generated in IRAC by the stream of day-to-day
decisions. We think that this process should be replaced by con-
scious policy consideration at the appropriate policy level.
IRAC recommendations for assignments of frequencies by Executive
Order should be transmitted to the new telecommunications Board,
and IRAC should koep the Board informed as to interim assignments.
IRAC should take on the new task of periodic review of assignments
to Government agencies, and should hear in the first instance
justifications of agency requests to retain assignments already made.
Those tasks aro considerably larger than those IRAC new carries;
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representatives of agencies composing IRAC may havo to dovoto most
or all of their time t IRAC business. The now agency should spot..
chock IRAC assignments to determine compliance with presidential
policy. IRAC should be kept flexible to participate as technical
advisor to tho.various Government agencies in the formulation of
Government tolecommunications policies and positions.
IRACIs membership should include as a matter of course every
Federal agency which is a substantial user and operator of radio
communications.
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CHAPTER VI
TOWARD A.NATIONAL POLICY
In our study of existing telecommunications policy, we find
little to go on '2,xtant policy is meager, clnd varies from self-
evident generalities about very broad issues to filigreed treatment
of highly specialized detail. The policy statements in this Chapter
have been assembled by the Hoard in the course of ita work. They
include:
(1) statements of published policy drawn from treaties, laws,
and expressions by committees or other groups dealing with tele-
communications, which are enclosed in quotation marks;
(2) statements of commonly accepted policy, not hitherto
formally expressed, which are indicated by underscoring; and
(3) statements of newly formulated uuggested policy, which
are presented in roman type without special indication.
We have arranged this material in a logical order to produce
an integrated statement of general policy and specific policy actions.
As far as possible, the Chapter has been circulated Informally to
P
interdsted organizations in the United States for comments and sug-.
gestions, many of which have led to improvements.
The time available to the Board aid not allow us to obtain
Aiagments and observations on all phases of the subject; nor could
we pursue the ramifications of telecommunications policy into re-
lated policy for other fields. Hence this compilation is not con-
sidered as conclusive or binding, nor in itself sufficient for guidance
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in telecommunication activities. Rather, it is regarded as a
starting point from which national telecommunications, policy can -
be further developed.
The conceptis notjlow; it ha a proved its value to the estab-
-liahment of efficient national procedures-in comparable-fieIda;-----
For example, "A Statement of Certain Policies of the Executive
Branch of the Government 'in the General Field of Aviation," pre-
-.pared for the President by the Air Coordinating Committee in 1947,
is a valuable document setting forth policies esoential to the -
advancement of United States aviation.
In the proparation of this effort ata kindred statement regard-
ing United States telecommunications, their relationship to the
national defense and security and to the national welfare and pros-
perity ha n been taken into account. Telecommunications are here
conaidered to relate to national defense as part of the resources
which the_ndtion uses in combating hostile armed forces; to national
security as part of the organized effort to maintain the national
strength and to safeguard the nation against harmful influences,
internal or external; to national welfare as they are used for the .
.growth of national enlightenment and health; and to national pros-
perity as they aid in tho growth of trade, in tho production effort
of the nation, and in the resultant enhancement of the'nationis in-
fluence in world affairs. These relationship4.taken ea a whole,
':l.comprise the national interest;
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I. General Telecommunications Policy
292.
A. Public Communioldiknit=2Itame
There shall be "available, so far as possible, to all the
people of the United States a rapid, efficient, nationwide and
werldwide wire and radio communication service with adequate facili-
ties at reasonable charges. . ."
Public Communioo?
1. The radio frequency spectrum is a world resource in the
public domain.
Our Government must adopt policies and measures to
insure that this resource ia
with due regard to the needs
2. The United States,
used in th. best interests of the nntion,
and rights of other nations,
almost alone. among the nations of the
'world, relies on privately owned tolecoMmunications companies to
play the principal part in the CountrYis telecommunications system.
It should continue to be the policy of the United States Government
.to encourage and promote the health of the privately owned companies
aa a vital national asset.
3. The United Ste-tea telecommunications system is essential
to the national security, to international relations and to the
business, social,-edueational, and political life of the country.
8Ience Government must remain alert to the problems of this system,
and,be:prepared'to support measures necessary to insure the con-
, _ . _ _
_
tinued-strength of the telecemmunications system as a whole.
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C. NaLl021-aggnaQ
In time of war or rational emerponcy,.as proclaimed by tho
Proefttentl,z_the Government of the United Statag_gball have avail-
able to it-the...12121 telecommications resources of the nation
for utilization with due regayd to the extent of the war or mar-
EDILIend to the UgliMing-9.0121I1A1.91_2014.02-9.211Piderod to h2
_ogo atl.. 1 or desjrable for
Stales during such a time.
gafittLIcLaaa
"The national security, the nation's sea commerce, and the
assurance of adequate safety of life and property at sea require an
efficient, integrated, standardized system of radio and electronic
aids for marine navigation. . . .
"In consequence, it is vital to the national interest that the
United States play a leading role in the development, investigation,
selection and standardization of a werld-wide system for marine
navigation. . . .at the earliest practicable moment consistent with
open-mindedne'ss and sound technical judgment directed toward the
attainment of optimum results, with due consideration for the cost
to ship operators being kept as low as possible. . .
"To simplify standardization, to effect the greatest economy in
op'eration and to further the most economical uso of the radio spec-
tun, the joint use of radio aids by both air and sea craft is. ? ? .
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advocated whore mutually advantageous." - Soo Appendix II)
E. Safota_in the Air
The nation's air travel and the a surance of safety of life and
intaimpled, standardize4,
sYstme of raclie and olestronisn-vipa.Iim;
therefore '"The United States will Support and promete a single system
of electronic long-distance aids to (air) navigation for United States
?
and world-wide standardization. . . .
"The United States will take the necessary stops to obtain and
maintain at all,times the qualitative and quantitative data by which
the choice of eledtronic long-distance aids to navigation can be
,determined and furthered internationally!" (See 'Appendix III)
?IpIzagtional Communicatiug
1. The United States considers the International Telecommuni-
cation Union to be the competent and appropriate international forum
for the purpose of negotiating world-wide agreements on telecommuni-
cation matters.:
2. The United States should be appropriately represented at any
International telecommunications conference when such a conference is
.considered to berrolated, directly or indireCtly, to .the national
defense, security, welfare, or prosperity.
3. The United States should. foster and encourage the partici-
k
lioatien for the purpobo-of providing advice :and information of experts
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from its commercial communications enterprises in the work prepara-
tory to and at telecommunications -conferences which involve the
commercial communications interests of the United States.
4. The fact that both cable and radio facilities are required
by the United States for its overseas telecommunications system shall
guide consideration of any material matters which affect the avail-
ability, in the form of continued operation, of eithermedium.
II. Specific Policy Actions
. Radio Frequencies
1. ThqlIgted States considers that a baaiciidc
in the normal._a_ssinitnar_a_gd.0.9..q
is the avoidance of harmful interference,.
2. Logr_Kang2_110111Lemcncies for other than overseas,
arcults normally shall be used o 1 when other forms of communicq-
tion notably wire
3. PrioritiesinthelJorma1assinmentfradiofre_s-
owsintheorername:
(a) E.U.Q=9.10 dir.aatLfor Y
1 security.M1-.?1.2fXl.s..z_ati2h-Ln2.21.12..:,g22.1-.01-
2ies are used for purposes which are vital to the safety of the
nation
'(D) E11211911.9.1M11021,allag.L...M4S0.1101.0111ALEMILY
0 9 d i e nd re ort in colli4tiam_aLd1=2.21.
OLSRIQ
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? (c) Frequencies used in porvicos that have no other adogatIbe
melog_gf_mapid communication1 when puch commnication ip con-
idered to be neceasar or de irable ? the nationantereet.
(d) aequencies used for all other vurposes. ,the assignment
of which mutbe .judged upohemorits of individual need.
B. Radig_ao:trum Vtilization
1. kl.Lidavi,f limitations of usable
to insure the best .110,01.ble oturn thutheroof4 it is i
boat lntaLadaat_th2-1111-PLagIga_in....tda.g...91.104.9..I2-X9.2m1x9-42,1
of ite ueere to:
(a) Justify in a eatisfactorY and equitable tanner. any -
'exempt an elnergenV reque.ELLI=11112,..112aunakIL-Pda,&2-Ihg
tissianment of such frequencies. and
(b) Confirpjlly, ix
gianderde, that use of p
jnatifi21.1121.101014=t42-114
(c) Submit evidLEG&LILL1IdlUataiWka.241-9SUWala
It will further be in the boot intee8ts of the Unitad States in
consid -ration o
and c h reto ore mona o her c
to dpcido,bv high-level impartial determinatiop, the disPosition of
no or r.enc es not assi
te a claimant
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2. Common standards of performance and efficiency of radio
spectrum utilization shall be developed and applied to each typo of
radio operation. All users of the radio spectrum shall be required
-
to adhere) to those standards.
Miscollaneoug
Fixed Service
1. Euzumgy-conserving_te2hniaw- shall bo.apnliglzhgn-
saa,m22-112104,in_xadia.9=2119ns and particularly in the operation
of point to point radio cir9uits. These tochnioues include such
dovolorments as ainglo sideband o oration nd fr .uono -shift ke
Aeronalalgal
1. ?uhlic
exc1usive1y_a11ocatodtotica.
2. Tho Unite St to
ste
f adio co
'ions of
tion between qlmraf_LLa_l_lho_glytritimeMbileSerice,
c rres onde ce bo-
hich rovid a mean r the xc
twoon rer ft i fli ht and t
and onhances safety.
Maritime -
neral
lic
bl on world w st bas s
-
-c1-212-d.WZagfund-d1..E.Q--.5.12-.22M10-2)
9.g_psocribod by_Ills)42Eunt International Radio Rogulaaana,_ghall
to so th me rimaril e sbo ed to on a ist n o or
o safeguard life and property on the high seas.
RESTRICM)
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Amateur
1. The Amatour_Service shall_lajIlLbared_gnd oncoura_od
because th_gi_japAls2_621.2_70.1.1.1.9.Lo_u_s2LA.ba_:_,Amat.=
Itraillgg12.1101.1.912210s 9n4-219.-AWIDYS.0-49.-IIIAlizg_th.0% is vitsa
tim s o em r one wh ther
itzr::
e c ba o a localAmft
tana....u_.,eoz.jati21222.1.4,1s.sope.
2.DeUrZita.,...0.a..01.Q.iited.._s2yullnylaur_amvics to
be vitally necessary to tlig_DaIjanal_daaammi_ugultz_haulso it
Telegraph
1. The Government of th United States shoulLotaffie_domes-
'tic umaialtign circuits as it'considers necess'ary, for the conduct
oP Fedora Government business ? further such domestic communication
circuits shall be available for an Federal Government use if such
use is considered to 1lLxyacticable and to afford economy: provided,
that such domestic circuits operated b the Federal Government be -
leased or rented whenova_RaLWILLss_alaaLj.cable, from the commer-
cial communications umanios4 The Government should not in oner21,
install its own domestic circuits wher vor ade t and efficient
facilitioszgy be econoili,call lease or roitecLfrom commercial
soupee.a.
EL21.11Igma
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2. The United States sulssLibes 12_:_t_h_p_glandardization
the 5.uriit codo of ternat'onal Telefataph Alphabet aber Two.
3. , The United States advotes....t.14_9111_1_2221,71in o g.pecia3,
xates Xor Governinorrb te1egrapu in e IdgmajjimaLflayjc-
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APPENDIX I
STATEMENT BY THE _DEPARTMENT OF DEFENSE
OF MILITARY DEPENDENCE ON THE
DOMESTIC 1COMMERCIAL) COMMUNICATIONS FACILITIES
OF THE UNITED STATES
14-- General. 'The nerve system of National Defense is the sum total
of all communications systems that are available, operationally and
- 'potentially, for the prosecution of any emergency or war effort. The
?operational existence of nation-wide systems of rapid voice and _record
communication's in peacetime is indispensable from the standpoint of
meeting the wartime requirements of both the Military Services and
the civil economy. As the intensityand complexity of warfare con-
tinues to increase, correspondingly greater demands will be placed
,on the communications systems of the nation from the standpoint of
both-circuit capacity and flexibility of operation. It is, therefore,,
considered in the vital interest of National Defense that there be
maintained within the United States to meet that need, as many nation-
? wide commercial communications systems as are economically feasible.
2. Military Policy Regarding Use of Commercisl Facilities.
It is impracticable to employ similar concepts and standards in
? assessing military and commercial communications requirements. In the
development of commercial facilities expected revenue must of natural
consequence be a prime consideration. Military communications, on the
other hand, as an essential element of command must first satisfy
Ailitary needs with economy of force or funds an important but seconaary
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consideration. As a result of this fundamental difference, it is
impossible for the Military to enunciate a policy which will under_
all conditions prescribe the specific degree to which it will utilize
or depend on commercial communications facilities, It is incumbent
on all military commanders, -in compliance with the basic principle
of economy of force, to make maximum possible use of all existing
facilities available to them including commercial service. Before
reaching a decision to employ other than strictly military facilities,
each commander based on the conditions prevailing in his area must
weigh any advantages from the standpoint of economy against the result.
ing, effect on military security and control, dependability of service
and the rapid flow of military messages. As general policy, therefore,
It may be stated that the Military Services will whenever practicable,
utilize commercial facilities and service in the interest of economy
of force or funds provided that acceptable military standards of
security, control, and -.service can be maintained,
3. Military Use of Commercial Facilities in the Zone of the Interior'.
_ _-
During the early period in the development of national-communications
systems, it was necessary for the Military Services to construct and
operate their own communications facilities in the Zone of the Interior.
Today, however, extensive, dependable commercial communications net-
*orks cover the length and breadth of the United States. From the
standpoint of security, the risk normally involved in partial military
cbntrol of its communications has been considered as being'relatively
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low withinthe continental -United States. This condition is a
. result of the close working relationship that exists between the
Military Services and the commercial communication organizations
and the existence of adequate legislation to permit-prompt government
operation and control if deemed advisable in the national interest.
Under these conditions, the construction and maintenance of com-
pletely separate communications systems within the United States for
exclusive military use would entail an unjustifiable outlay of funds,
manpower, and equipment. Military policy concerning use of commercial
communications facilities in the Zone of the Interior may, therefore,
be summarized as follows:
"Within the continental limits of the United States, the
Military Services, in establishing communications networks for
the purpose of interconnecting their various headquarters, in-
stallations and activities, will by lease or other contractual
arrangement, utilize commercial facilities and services when
available and feasible except where unusual security or operational
conditions are required. The terminal facilities including com-
munications centers and relay stations of these networks will be
operated and controlled by the Military Services,
The
The Commercial Communicationslatmorks as a Source of Trained
Emmulfor Military_Euvice.
The Military Services can maintain in peacetime only the nucleus
a wartime communications system. It is also well established that
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the impact of a state of war or national emergency on military com-
munications systems is instantaneous and can only be met through
immediate expansion of both trunk and terminal facilities.
Modern communications facilities while extremely efficient require
a comparatively long lead time in the training of operator and main-
tenance personnel.' Hence in the critical period between the outbreak
of hostilities and the time when military training programs can meet
over-all demands, the commercial systems of the United States represen'c
an important scum) of additional trained communications personnel
for military service.
In this:-connection,A.t IS the policy of the Military Services to
maintain a close, working relationship with the commercial communica-
tions companies of the nation in order that anticipated wartime military
requirements may be refleCted in peacetime expansion and training pro-
grams and to the end that emergency military needs for trained communi-
cations personnel may be met and with minimum effect on the continued
operation-of vital domestic communications facilities. Further, to
facilitate the transition of commercial communications personnel from
civilian to military operation, it is the policy of the Military Ser-
vices to utilize fixed communications equipment of standard commercial
design to the maximum possible extent and to prescribe similar opera-
tional and maintenance techniques.
5. :aL=Sps.ofrrendsiMiitoDomestic Communications Facilities.
it The Military Services do not foresee the necessity for any
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material change in current policy concerning their use of commercial
facilities within the Zone ,of the Interior. In bothpeace and war,
these facilities have proven to be operationally reliable and fully
responsive to military requirements. This, in effect, means that
for continuous, effective coordination of military operations within
the United States, the Military Services will remain largely de-
pendent on the commercial communications systems of the nation.
Hence, while not being in a position to.pass judgment on measures
designed to improve the? economic well-being of the commercial com-
panies, the Military Services will have a vital-.Interest in any
.changes which might adversely affect the capacity and operational
efficiency of the commercial systems.
The advent of long-range highly. destructive -warfare, including
' intensive infiltration 1)y-subversive elements, will require greatly
:increased defensive measures on the part of both military and
civilian agencies.; The impact of this increase on the domestic
communications facilities of the nation has not been fully deter.
mined, but may _reasonably be expected to be of considerable-tro-
portion.
?- '
---;.-Instrumentalities now exist which provide that in time of war
,or national emergencyllhe total telecommunications resources of the
nation can be placed at the disposal of the government. The Military
Services are mindful, however, that any suCcessful prosecution of a
Awar effort will require that all agencies contributing to this effort
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be afforded use of these facilities on a just and equitable basis and
in addition, must insure reasonable safety, comfort-, and security for
the civilian populace. To this end, the Military Services believe
that the domestic communications systems of the United States should
be as efficient and dependable as sound engineering, reasonable economy
_ ?
and good operating practices will allow, and that their capacity should
reflect not only the ability to handle greatly increased wartime volumer,
but maximum flexibility in torms of as many alternate routings and types
of facilities as can be had consistent with the ability of the commer-
cial companies to realize a reasonable profit from their investments.
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APPENDIX II
UNITED STATES POLICY FOR RADIO
AND ELECTRONIC AIDS FOR MARINE NAVIGATION
The national security, the nation's sea commerce, and the assurance of ade-
quate safety of life and property at sea require an efficient, integrated,
standardized system of radio and electronic aids for marine navigation.
A multiplicity of new radio and electronic devices and systems possessing
potential applicability for marine navigation have been developed during
recent years, both at home and abroad. In fact, the devices and systems
which have been developed and made potentially available as aids to navi-
gation are so numerous that standardization is mandatory if the encourage-
ment and development of United States sea commerce is to take place _ --
economically and realistically.
In consequence, it is vital to the national interest that the United States
play a leading role in the development, investigation, selection and stan-
dardization of a world-wide system for marine navigation. This role should
be played at the earliest practicable moment consistent with open-minded-
ness and sound technical judgment directed toward the attainment of opti-
mum results, with due cOnsideration for the cost to ship operators being
kept as low as practicable. .
An open-minded attitude shall be maintained toward novel systems and de-
vices which eventually may develop to be superior to existing systems.
This attitude, however, shall not be permitted to retard the adoption of
a world system based on systems already proved and in wide use over a
large part of the world's waterways.
To simplify standardization, te effect the greatest economy in operation
and to further the most economical use of the radio spectrum, the joint
use of radio aids by both air and sea craft is hereby advocated where
mutually advantageous.
The policy contained herein is applicable for domestic guidance as well
as for use as a basis for international discussions on standardization
of devices, systems and performance.
For the present and at least the immediate future the following devices
aneksystems are advocated as being practicable.
Navigation
kik. Anti-Collision.
' The use of radar shall be encouraged-in order to enhance safe
and economical elieration primarily to reduce the risk of collision.
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B. Position Fixing.
307.
1. Distances over fifty miles.
(Aid to ocean navigation requiring accuracy of 1% and
allowing 15 minutes to obtain position fix.)
(a)
Loran - This system shall be continued, improved
and expanded.
(b) Shipboard MFADF with radioboacona -(useful up to
200 miles). This system shall be cont1nu9d,
improved and expanded.
Dj.stances between 50 and 3 miles.
(Aid to approaching land, coastal navigation and port
approach requiring ono-half mile to 200 yards accuracy
and allowing 5 minutes to one-half minute respoctively
to obtain position fix.)
Shipboard MF/DF with radiobeacons. This system
shall be continued, improved and expanded.
(b). Shipboard radars. Their use shall be encouraged
and the devices shall be improved.
Radar aids, both active and passive. They are
necessary for the special marking of navigational
aids, dangers and shore features, to facilitate
identification by radar. Their further develop-
ment for purposes of operational evaluation should
be continued.
Distances lose than 3 miles.
(Aid to harbor entrance requiring 50 yards accuracy and
instantaneous position and track fixing.)
Shipboard radars (high resolution). Their use
should be encouraged and the devices shall be
improved.
Radar aids, both active and passive. They are
necessary for the special marking of navigational
aids, dangers and shore features, to facilitate
identification by radar. Their further develop-
ment for purposes of operational evaluation should
be continued.
1E0_2=
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(c) Shipboard MF/DF with radiobeacons. This system
shall be continued, improved and expanded. .
II. Harbor Contro1LIELJIIdan,S2Lmmigailm.
A. Harbor Control Radar.
This service shall be provided as required.
. Harbor Control Communications.
-VHF Radiotelephone channels for harbor control purposes
shall be provided. The_channels and modulation should be
standardized internationally.
'III. Frequencies.
The United States shall advocate the international standardization of
frequency allocations for use or operational evaluation with respect -
to the above devices and systems.
It is believed .that the frequency allocations recommended to the De-
partment of State by the Interdepartmental Radio Advisory Committee
and the Federal Communications Commission will meet the operational
and technical requirements of the radio navigational devices and
wstems herein designated. Those are as follows:
A. Shipboard Radar: 3000 to 3246 Mc
5460 to 5650 Mc
9320 to 9500 Mc
3256 Mos j 10 Mc
5450 Mos j 10 Mc
9310 Mcs 10 Mc-
Loran: 1800 to 2000
LF/MF Radiobeacons 280 to 320 kc
Harbor Control Communi-
cations in the Band: 152 to 162 Mc
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APPENDIX III
UNITED STATES NATIONAL POLICY ON:ELECTRONIC?
UONG-DISTANCE AIDS TO NAVIGATION*
309.
POLICY
1. The policy of the United Stntes in respect to oloctronic long-dis-
tanco aids to navigation is as follows:
. ,
a. The United States will support and promote a single system of
electronic long-distance aids to navigation for United Statos and
world-wide standardization.
b. At the present time the aids which tho United States haa
adopted and now supports and promotes are Loran and high-power
LF/MF Non-Diroctional Beacons in that order of preforenCe.
(1) "Loran" is considered as one typo of aid regardless of
the frequency employed.
(2) Loran will be continued, improved, and expanded to provide
needed coverage. Tho choice of a frequoncy for Loran installa-
tions in any particular area will be governed by the require-
ments to be met and the frequencies available in that area.
(3) Wherever it is technically, economically or operationally
desirable, tho United States supports LF/MF Non-Directional
Beacons of sufficient power to moot requirements in a spocifio
area.
? (4) Recognizing tho special recommendations set forth in At-
? tachment A of tho draft document, "Annex 10 to the Convention
of International Civil Aviation," during the interim period
the continued use or extension of other systems will not be
acceptable if such system or.systomg require airborne or ship-
borne equipment in excess of, or different fromIthat required
? for the use of Loran or LF/MF Non-Directional Beacons.
a. The United States will take the necessary steps to obtain and
maintain at all times the qualitative and quantitative data by which
tho choice of electronic long distance aids to navigation can be
determinod and furthered internationally.
*AppRoved by TCC., (Document No. 557), January 31, 1950
Approved. by ACC (Document No 58/5D)1, April 19, 1950 .
RESTRICTED
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310.
APPENDIX IV
? REFERENCE SHEET
I. General Telecommunications Policy
A. Public Communications?Purpose -Communications Act of 1934
D. Public Communications?Policy New
G. National Defense Executive Order #8546, dated
September 24, 1940, defining
functions and duties of Defense
Communications Board
D. Safety at Sea United States Policy for Radio
and Electronic Aids for Marine
Navigation, 1947
Air Coordinating Committee
Document 58/5D, April 19, 1950
F. International Communications Present practice
E. Safety in the Air
II. Specific Policy Actions
A. Radio Frequencies
. Radio Spectrum Utilization
. Miscellaneous
Fixed
Aeronautical
?Maritime
Amateur
Telegraph
RESTRICTIM
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1. Atlantic City Convention
2. IRAC Report to Subcommittee
of_the House Committee on Inter-
state and Foreign Commerce,
81st Congress, 2nd Session .
Proposed
Atlantic City Convention, Art. 42
Atlantic City Radio Regulations,
Sections 396 and 398
Atlantic City Radio Regulations,
Article 27
Atlantic City Radio Regulations,
:Articles 5 and 33
Present Practice
U. S. proposals to International
Telegraph and Telephone Con-
ference, Paris, May-August, 1949,
(Report of Chairman of U. S. Dele-
gation, dated Oct. 31, 1949).
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Appendix I.
Appendix II.
311.
Military Statement re Domestic U. S. Communications,
(Department of Defense)
"United States Policy for Radio and Electronic Aids
for Marine Navigation." Prepared by an ad hoc
committee headed by Admiral Merlin O'Neill, U.S.C.G.,
and representing all major U. S. maritime interests.
Approved by the Telecommunications Coordinating
Committee on September 4, 1946, ICC Document 112.
Appendix III. ACC-TCC Document on Electronic Long-Distance Aids
to Navigation!
r.
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HISTORY AND ORGANIZATION
President's Communications Policy Board
312.
Shortly after the appointment of the Presidents Communi-
cations Policy Board on February 17, 1950, the Chairman came to
Washington to diseuss plans and programs with officials in the
Executive Office of the President.
On March 100 the Board held its first meeting in the offices
of the Federal Communications Commission. Federal agencies con-
cerned with telecommunications problems were represented. The
meeting was devoted to a review of specific issues related to the
Board's mission. At this meeting, the Signal Corps invited the
Board to set up its offices in the Pentagon, and undertook to pro-
vide necessary administrative services. During the next month, the
Board commenced organization of its staff.
The Board held 59 sessions. Procedure was informal and off
the record. Much of the time in these sessions was spent in dis-
cussion and analysis of major telecommunications problems and
policies with specially qualified people in Government, in industry,
and iA private life. This procedure enab1ed the Board to secure a
maximum of pertinent data in minimum time.
The Board also requested and received formal statements on
the issues before it from a large number of Government and private
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officials and experts. Members of the Board and its "staff drew
heavily on these and other sources On an informal basis as well.
A small and highly competent professional staff was set up
to make detailed studies and .analyses of telecommunications poll-
ciba and problems.
The Board wishes to express_its indebtedness to Charles' A. H.
Thomson, Staff Director and chief executive officer
for .his effec-
tive Management of the staff work of the Board. It alad -wishes to
thank Fred O. Alexander, who ably organized and directed the technical
studies, particularly on frequency utilization which have contri-
buted so much to the report.
Other senior members were William E. Plummer -William F.
?
:.)44ppers, Ralph O. Smith, Ernest Q. Shaffer, and John J. Keel.
These senior members were Assisted by Julia M. Gilbert and
Charlotte Hazard. Margaret J. Myers and:Doris Gates served as
Sectetary to the Board. Carol Ashworth, Robert J. Eames, and
Betty T. Walters gave. secretarial and clerical assistance.
F. G. Fassatt Jr.., and Charles Schwarz gave specialhelp in
writing and editing the report.
All members of the Staff contributed time and energy beyond
any normal call to duty, And in a very real sense shared, in the
Irk'of the, Beard.,
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314.
The Board -contracted with Ford, Bacon and Davis, engineers,
-
for a study of the economics of the record communications industry,
and with Dr. Bonnar B. Brown of the Stanford Research Institut?
for special economic consulting service.
Many Government departments and agencies--in particular,
the Federal Communications Commission, the Department of Defense,
he Department of State, and the Department of Commerce?made
available a large mass of detailed information about telecommunica-
tions operations and policies. These agencies prepared special
reports for the use of the Board which permitted a more comprehen-
sive view of the telecommunications system of the country than had
previously been available in, any one place.
Without this opportunity to tap special resources, the Board
could not have, in the time available, cevered tha ground neceSsary
to completion of its report.
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