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Section 410 concerns the lending power of the bank and permits it to make loans virtually without restriction, including loans for acquisitions, exchanges of property and construction of G&T facilities.
Subsection (b) contains "restrictions," which provide for loans up to a period of 50 years, and authorizes intermediate loans at a maximum interest rate of 4%. It provides that "other" loans shall bear interest at a rate which reflects the cost of money, and a reserve for losses, but not necessarily at a rate to accumulate a surplus so as to repay the United States investment. Furthermore, the Secretary and the Governor will decide whether any borrower is "capable" of paying interest rates above 4% and still "achieve the objectives of the Federal rural electrification program", or whether such borrower is eligible for a loan at 2% under the Rural Electrification Act. Thus, the bill would allow the Department of Agriculture to continue making subsidized loans so long as the Secretary and the REA Administrator believe it desirable in order to achieve the objectives of the program.
The following member State Chambers of Commerce in the Council endorse this statement in its opposition to the electric bank proposals in H.R. 14000 and H.R. 14837:
Mr. POAGE. Thank you very much. ance here this morning.
We appreciate your appear
Mr. CALLAN. This represents about 50 percent of the State chambers of commerce?
Mr. RINTA. Oh, no; no, no. It represents 27 out of 31. There are many States which do not have a State chamber.
Mr. CALLAN. What is the position of the other people who are not listed in here.
Mr. RINTA. You mean the four?
Mr. CALLAN. It is more than that.
Mr. RINTA. Nebraska is not a member of our council.
Mr. CALLAN. Nebraska is not in here.
Mr. RINTA. They recently organized. We hope to have them.
Mr. RINTA. We have 31 member organizations.
Mr. CALLAN. Of the 50 States, you have 31?
Mr. RINTA. There are 50 States, but there are not 50 State chamber of commerce organizations. The only organizations which are not members of the council are the Nebraska chamber, which is a newly organized State chamber, and the California chamber, which is a very substantial organization that has existed for many years, but which is not a member of our organization.
Mr. CALLAN. What is the position of the Nebraska State Chamber of Commerce; do you know?
Mr. RINTA. I would not know.
Mr. CALLAN. You have 27 of them listed here. What chambers of commerce, just the ones listed here?
Mr. RINTA. The 27.
Mr. CALLAN. But you do not know what the position of the other State organizations are, do you?
Mr. RINTA. No.
Mr. CALLAN. So, you are representing about one-half, because you have 31 of them-about one-half of the States are represented.
Mr. RINTA. That is right.
Mr. CALLAN. Thank you.
Mr. TEAGUE of California. I understood you to say that some States do not have State chambers of commerce?
Mr. RINTA. Many States do not have State chambers of commerce. Mr. CALLAN. But 50 percent of the States, that is what you are talking about. You are not talking about 50 States; you are talking about 50 percent of the States of the country; right?
Mr. RINTA. I am speaking for those listed here.
Mr. CALLAN. Correct.
Mr. RINTA. That is correct.
Mr. TEAGUE of California. I will do something that is a little dangerous, perhaps. I will make the statement that, in my opinion, the California State chamber organization, if it were a member of this organization, would share the opinion that you have expressed in behalf of the other organizations.
Mr. RINTA. Thank you.
Mr. POAGE. Are there any further questions?
Mr. TEAGUE of California. May I go off the record?
Mr. POAGE. Yes.
(Discussion was had outside the record.)
Mr. POAGE. I ask unanimous consent to insert a prepared statement by Mr. Frederick W. Ford, president, National Community Television Association, Inc., in the record. Is there any objection to its insertion? If not, it will be inserted into the record at this point.
(The prepared statement of Frederick W. Ford and a letter from National Association of Broadcasters follows:)
STATEMENT OF FREDERICK W. FORD, PRESIDENT, NATIONAL COMMUNITY TELEVISION ASSOCIATION, INC.
My name is Frederick W. Ford. I am president of the National Community Television Association, Inc. (NCTA), with offices at 535 Transportation Building, Washington, D.C. The association is composed of about 715 operating CATV member systems serving roughly 65 percent of the total subscribers to community antenna television (CATV) systems in the Nation, and 82 associate members who are engaged in manufacturing or a related activity. In addition there are approximately 222 member systems under construction.
I wish to comment regarding Title VI, Section 610(b) (5) of H.R. 14837, the provision which would permit telephone companies to borrow federal funds to construct or acquire or otherwise engage in the business of community antenna television.
In 1962, H.R. 10708, a bill to amend Section 203 (a) of the Rural Electrification Act of 1936 was enacted. It contains a provision that community antenna television system services or facilities other than those intended exclusively for educational purposes, shall not be deemed to be telephone service for the purposes of that Act.
The exclusion of commercial CATV from REA financed telephone operations was considered by your Committee and the Senate Committee on Agriculture and Forestry prior to the enactment of H.R. 10708 in 1962. The National Community Television Association at that time made known its conviction that REA funds should not be loaned for the purpose of enabling telephone companies to enter into the commercial CATV business. We adhere to that position and as a matter of fact, are convinced more than ever that federal funds should not be made available for this purpose. We do not object to the use of said funds exclusively for educational purposes which is presently permitted under Title II, Section 203 (a) of the REA Act of 1936.
The business of Community Antenna Television is not a common carrier communications activity. This was decided by the Federal Communications Commission and affirmed by the U.S. Court of Appeals for the District of Columbia in Philadelphia Broadcasting Co. v. FCC, No. 19,577, March 28, 1966. It is in the nature of a private enterprise and, historically, has been developed by private businessmen in the various localities throughout this Nation.
There has been no scarcity of individuals with initiative and foresight to provide CATV service in any community where there is a chance of building a viable business. We have members of our Association who operate with as few as 300 to 400 subscribers. Many of our members and other businessmen are today seeking franchises in communities throughout the country. Lack of capital has been no problem to the industry in the last two or three years. There is no necessity for telephone companies to go into the CATV business and certainly neither a necessity or reason for federal funds to be used to underwrite such an activity. This would be highly discriminatory if the same financing were not made available to all CATV operators who wish to construct or acquire CATV systems.
I have alluded to the fact that private businessmen have built this industry and are vigorously expanding it even into very small communities. Increasingly these businessmen in seeking permits or franchises from communities are running into competition to provide CATV service from telephone companies. This is true even though CATV is a reception service for television channels containing what is essentially entertainment. While the bringing of such reception to the public is a public service in that it enables more people to enjoy better television, it is not the furnishing of a necessity of life. CATV has prospered because people are willing to pay for better entertainment.
The Federal Communications Commission has served notice in its Second Report and Order that "our goal is to integrate the CATV service into the national television structure in such a way as to promote maximum television service to all the people ***." In so doing, the FCC has said that CATV performs a supplementary role to broadcasting. As was said by the Supreme Court in FCC v. Sanders Bros., 309 U.S. 470, 474-475:
"Furthermore, the service by television as well as radio is more akin to that of music halls, theaters, and newspapers than it is to that of either telephone or telegraph corporations. Thus, under the Communications Act of 1934 those engaged in the telephone or telegraph business are regulated as common carriers where as television and radio broadcasting is recognized as a field of free competition."
FCC v. Sanders Bros., 309 U.S. 470, 474-475. (Footnotes omitted.)
REA funds should no more be made available to telephone companies to go into the CATV business than it should allow them to operate theaters or newspapers or music halls.
Telephone companies are obligated to serve public demand. The very basis of REA funds is to assist such companies to bring to as many of our citizens as possible the best telephone service that can be provided. This goal becomes increasingly important as the nature of our society becomes more complicated. The nature of the necessity for the ability to communicate with the rest of the community. the Nation and the world has intensified. The interest and concentration of telephone companies on this goal should not be diverted or diluted by encouragement to enter into business enterprises not related to that goal.
As an example of what can happen, a newspaper article of June 2, 1966, reports that an independent telephone company in North Carolina has applied to the Public Utilities Commission for authority to branch out into the CATV business through acquisition of a CATV company. The telephone company involved provides telephone service in 41 counties but is obtaining CATV franchises all over the State. In one large city, the telephone company in partnership with
a broadcasting company is seeking permission to build a CATV system. I suggest that this type of activity can only lead to a subordination of the primary obligation of the telephone company.
In many communities, there is more than one CATV system. For example, in each of nine Pennsylvania communities there are two CATV systems. And this is occurring all over the United States. For a telephone company to have access to federal funds with which to compete with a private business for CATV business in a community would, in my opinion, be inimical to the purposes of the REA, and to our private enterprise system.
By its Second Report and Order, supra, the FCC has promulgated detailed, complicated rules for CATV systems covering, among other things, whether they can go into business in certain markets, the signals they must carry and those which they cannot carry. In compelling the carrying of certain broadcast signals, the FCC is compelling CATV's to assume contingent copyright liability inasmuch as the Federal District Court for the Southern District of New York in United Artists Television, Inc. v. Fortnightly Corporation, Civil Action No. 60-2583, May 23, 1966, has decided that CATV's are liable for copyright infringement. This means that CATV systems may be incurring copyright liability in an indeterminate amount by virtue of the television signals they carry voluntarily and those they carry by command of the FCC. A telephone company entering the CATV business directly using REA funds could thereby subject itself to indeterminate liability. Should a copyright holder bring suit, the recovery, including the possibility of statutory penalties could be for amounts which would impair a telephone company's ability to serve telephone customers. For this and other reasons CATV is today a high risk business. One that should be left to those who are risking their own funds and not the taxpayers. Many of the members of NCTA have complained bitterly about practices of some telephone companies, particularly those who are using their telephone company regulated, monopoly position to get into CATV. Many such telephone companies have denied the use of space on their telephone poles solely for the purpose of preventing anyone but the telephone company from providing a CATV service even though the community involved may wish to permit a private, nontelephone company to engage in the CATV business. In these instances, telephone companies have used their monopoly position of telephone poles-poles built over public rights of way for a public purpose-to exclude CATV competitors from a private business. Other coercive practices have occurred. Many of our members would be seriously concerned if federal funds were made available to telephone companies for CATV purposes because it would encourage such companies to seek control of CATV.
In conclusion, NCTA is concerned about the degree to which telephone companies are accelerating their CATV activities. This has traditionally been an area of private business and we fervently hope it will so remain. It would not be proper to make federal funds available for regulated public utilities to expand into the CATV business unless such funds were made equally available to anyone else wishing to enter the business.
If CATV systems are allowed to exist and prosper commensurate with public demand for the service, we have every confidence that this service will be made available through private initiative, enterprise and financing to virtually all of the public who want it.
NATIONAL ASSOCIATION OF BROADCASTERS,
The Honorable HAROLD D. COOLEY,
Washington, D.C., 20515
DEAR MR. CHAIRMAN: The National Association of Broadcasters submits herewith its comments on H.R. 14837, a bill to amend the Rural Electrification Act of 1936, as amended, to provide additional sources of financing for rural electrification and rural telephone programs, and for other purposes. The bill provides in paragraph (5) of Title VI, Section 610 (b), that the term "telephone service" and "telephone lines, facilities, or systems" shall, for the purposes of this section be deemed also to include all types of community antenna television system services or facilities.
Enactment of the cited provision of H.R. 14837 would be discriminatory against other means of communication, such as television stations, television translators
and radio stations, which would not be entitled to borrow from the proposed telephone bank and thus would not be able to obtain loans under such favorable terms and rates of interest. Since CATV systems and television translators are brought into existence in response to the same public demand, namely extension of television signals, the provision for authority to lend to one means of communication and not to the other would be patently discriminatory.
Section 610 of H.R. 14837 would treat community antenna television systems as common carriers. On the other hand, the Interstate and Foreign Commerce Committee on June 17, 1966, reported H.R. 13286 to amend the Communications Act of 1934 to regulate community antenna systems. H.R. 13286, at page 4, line 7, provides that a person engaged in operating a community antenna system shall not, insofar as the person is so engaged, be deemed a common carrier. At no time has the Federal Communications Commission sought to impose common carrier regulation upon these systems. The FCC, in issuing its extensive Second Report and Order on March 8, 1966, to regulate community antenna television, did not treat such systems as common carriers. The Commission had been upheld in an earlier determination not to regulate CATV systems as common carriers by the Court of Appeals for the District of Columbia (Philadelphia Television Broadcasting Company v. FCC 359 F. (2) 282 (1966)). It is respectfully submitted that this means of communication ought not to be treated as a telephone system by one agency of the federal government and as an adjunct to broadcastings by another agency of the government.
During the consideration of H.R. 10708, in the Second Session of the 87th Congress, a similar problem arose. The legislation which was ultimately enacted into law made it clear that no commercial community antenna television operations were included in the definition of telephone service in the Rural Electrification Act of 1936 as amended (7 U.S.C. 924).
For the foregoing reasons the National Association of Broadcasters recommends to the Committee that the proviso with respect to community antenna television in Title VI, Section 610 (b) (5) be deleted.
VINCENT T. WASILEWSKI, President.
(The following statements and letters were also submitted to the committee :)
STATEMENT OF J. LEE RICE, JR., PRESIDENT OF ALLEGHENY POWER SYSTEM, INC. The comments which follow set forth the position of Allegheny Power System, Inc. with respect to H.R. 14000 and H.R. 14837 relative to supplemental financing for rural electric systems.
Allegheny is the parent company in an integrated electric utility holding company system which serves over 800,000 customers in an area of almost 30,000 square miles in Maryland, Ohio, Pennsylvania, Virginia and West Virginia. These bills differ in certain respects, but their basic purpose is the same. Both proceed from the unsupported assumption that the rural electric cooperative systems have growing capital needs that cannot be met by REA using funds authorized by Congress.
Both set up a loan account bookkeeping device that obscures the Federal investment involved.
Both provide for the establishment of a tax-exempt Federal Electric Bank for the purpose of making vast amounts of money available for loans to rural electric cooperatives.
Both provide for a Federal investment in the Bank of upwards of $1,000,000,000 with no absolute requirement for any return thereon or repayment thereof.
Both provide for the issue by the Bank of billions of dollars of debentures, tax exempt in the case of H.R. 14000.
Both provide for the underwriting of the Bank's losses by the Federal Treasury.
Both provide for a multi-billion dollar expansion, free from Congressional control, of a segment of the electric utility industry that returns no taxes to the Federal Government.
And, contrary to the impression received by some, neither bill eliminates, supersedes, or in any way limits the present Rural Electrification Administration program.