HE7763 .Asa CONTENTS Statement of— Cowgill, Harold G., Chief, Common Carrier Bureau, Federal Com- Ross, Bradford, attorney at law, representing United States Inde- Letters from- McConnaughey, George C., Chairman, Federal Communications Report from the Department of Justice, dated May 24, 1955- III Page 6 11 3 AMENDMENTS TO COMMON CARRIER SECTIONS OF COMMUNICATIONS ACT TUESDAY, JUNE 21, 1955 UNITED STATES SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, SUBCOMMITTEE ON COMMUNICATIONS, Washington, D. C. The subcommittee met, pursuant to notice, at 1:15 p. m., in room G-16, United States Capitol, Senator John O. Pastore (chairman of the subcommittee) presiding. Present: Senator Pastore. Professional staff member assigned to this hearing: Nicholas Zapple, communications counsel. Senator PASTORE. The committee will be in order. We will now take up S. 1456. S. 1456 generally amends those sections of the Communications Act of 1934 dealing with common carriers. Specifically, it amends section 212 which affects interlocking directorates; section 210 which deals with annual reports; section 221 which deals with hearings when telephone properties are consolidated or acquired by telephone companies; and section 410 which refers to the authority of joint boards. (The bill is as follows:) [S. 1456, 84th Cong., 1st sess.] A BILL To amend sections 212, 219 (a), 221 (a), and 410 (a) of the Communications Act of 1934, as amended Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 212 of the Communications Act of 1934, as amended, is amended to read as follows: "SEC. 212. After sixty days from the enactment of this Act it shall be unlawful for any person to hold the position of officer or director of more than one carrier subject to this Act, unless such holding shall have been authorized by order of the Commission, upon due showing in form and manner prescribed by the Commission, that neither public nor private interests will be adversely affected thereby: Provided, That the Commission may authorize persons to hold the position of officer or director in more than one such carrier, without regard to the requirements of this section, where it has found that one of the two or more carriers directly or indirectly owns more than 50 per centum of the stock of the other or others, or that 50 per centum or more of the stock of all such carriers is directly or indirectly owned by the same person. After this section takes effect it shall be unlawful for any officer or director of any carrier subject to this Act to receive for his own benefit, directly or indirectly, any money or thing of value in respect of negotiation, hypothecation, or sale of any securities issued or to be issued by such carrier, or to share in any of the proceeds thereof, or to participate in the making or paying of any dividends of such carriers from any funds properly included in capital account." SEC. 2. Section 219 of the Communications Act of 1934, as amended, is amended by inserting at the beginning of the second sentence of subsection (a) the words "Except as otherwise required by the Commission," so that the section will read: "SEC. 219. (a) The Commission is authorized to require annual reports under oath from all carriers subject to this Act, and from persons directly or indirectly 1 2 AMEND COMMON CARRIER SECTIONS OF COMMUNICATIONS ACT controlling or controlled by, or under direct or indirect common control with, any such carrier, to prescribe the manner in which such reports shall be made, and to require from such persons specific answers to all questions upon which the Commission may need information. Except as otherwise required by the Commission, such annual reports shall show in detail the amount of capital stock issued, the amount and privileges of each class of stock, the amounts paid therefor, and the manner of payment for the same; the dividends paid and the surplus fund, if any; the number of stockholders (and the names of the thirty largest holders of each class of stock and the amount held by each); the funded and floating debts and the interest paid thereon; the cost and value of the carrier's property, franchises, and equipments; the number of employees and the salaries paid each class; the names of all officers and directors, and the amount of salary, bonus, and all other compensation paid to each; the amounts expended for improvements each year, how expended, and the character of such improvements; the earnings and receipts from each branch of business and from all sources; the operating and other expenses; the balances of profit and loss; and a complete exhibit of the financial operations of the carrier each year, including an annual balance sheet. Such reports shall also contain such information in relation to charges or regulations concerning charges, or agreements." SEC. 3. Section 221 (a) of the Communications Act of 1934, as amended, is amended to read as follows: "SEC. 221. (a) Upon application of one or more telephone companies for authority to consolidate their properties or a part thereof into a single company, or for authority for one or more such companies to acquire the whole or any part of the property of another telephone company or other telephone companies or the control thereof by the purchase of securities or by lease or in any other like manner, when such consolidated company would be subject to this Act, the Commission shall give reasonable notice in writing to the Governor of each of the States in which the physical property affected, or any part thereof, is situated, and to the State commission having jurisdiction over telephone companies, and to such other persons as it may deem advisable, and shall afford such parties a reasonable opportunity to submit comments on the proposal. A public hearing shall be held in all cases unless the Commission determines that a hearing is not necessary in the public interest. If the Commission finds that the proposed consolidation, acquisition, or control will be of advantage to the persons to whom service is to be rendered and in the public interest, it shall certify to that effect; and thereupon any Act or Acts of Congress making the proposed transaction unlawful shall not apply. Nothing in this subsection shall be construed as in anywise limiting or restricting the powers of the several States to control and regulate telephone companies.' SEC. 4. Section 410 (a) of the Communications Act of 1934, as amended, is amended by inserting before the words "the Commission" in the second sentence of the section the words "an examiner provided for in section 11 of the Administrative Procedure Act, designated by" so that the section will read as follows: "SEC. 410. (a) Except as provided in section 409, the Commission may refer any matter arising in the administration of this Act to a joint board to be composed of a member, or of an equal number of members, as determined by the Commission, from each of the States in which the wire or radio communication affected by or involved in the proceeding takes place or is proposed. For purposes of acting upon such matter any such board shall have all the jurisdiction and powers conferred by law upon an examiner provided for in section 11 of the Administrative Procedure Act, designated by the Commission, and shall be subject to the same duties and obligations. The action of a joint board shall have such force and effect and its proceedings shall be conducted in such manner as the Commission shall by regulations prescribe. The joint board member or members for each State shall be nominated by the State commission of the State or by the Governor if there is no State commission, and appointed by the Federal Communications Commission. The Commission shall have discretion to reject any nominee. Joint board members shall receive such allowances for expenses as the Commission shall provide." Senator PASTORE. The record will show at this point a copy of a letter dated February 28, 1955, from the Federal Communications Commission to the United States Senate, urging the introduction of this legislation. I would like at this point to place into the record a letter dated May 24, 1955, from the Department of Justice commenting on S. 1456; also a letter received from Mr. Bradford Ross, attorney at law, representing United States Independent Telephone Association, in opposition to S. 1456. (The letters referred to are as follows:) The VICE PRESIDENT, FEDERAL COMMUNICATIONS COMMISSION, Washington, D. C. DEAR MR. VICE PRESIDENT: The Federal Communications Commission wishes to recommend for the consideration of the Senate four amendments to the Communications Act of 1934, as amended, relating to its regulatory authority over communications common carriers, enactment of which, it is believed, will substantilly relieve the administrative burdens of such regulation on both the Commission and the carriers subject to its jurisdiction without in any way detracting from the essential regulatory authority of the Commission. These amendments are to sections 212, 219 (a), 221 (a), and 410 (a) of the act, respectively. A draft bill incorporating each of the amendments is attached. Section 212 of the Communications Act presently makes it unlawful for any person to hold the position of officer or director of more than one carrier subject to the act, unless the dual holding is first authorized by Commission order upon a showing, in a manner to be prescribed by the Commission, that neither public nor private interests will be adversely affected thereby. An objective of Congress in enacting this requirement-the prevention of the exercise of indirect control over ostensibly competing carriers through such interlocking directorates-is, we believe, clearly salutary. But the all-embracing language of the section makes it applicable to dual holdings within an integrated communications system under common ownership and control as well as to interlocking relations between the competitive systems to which the section must have been primarily intended to apply. The result has been that in recent years the Commission has been called upon to consider a substantial number of requests by officers or directors of one company of a commonly owned and controlled system, such as the Bell System of the American Telephone & Telegraph Co., to serve as well in a similar capacity with respect to another company within the system. The Commission has felt that in such situations, where the dual holding cannot have any effect upon the ultimate control or management policy of either of the companies, the determination as to whether a particular individual can best serve the interests of the system by concentrating his efforts in one of the constituent companies or by making his talents available to more than one is a detail of carrier management which can and should be left to the discretion of the carrier itself. It has, accordingly, regularly issued orders approving such requests. It is believed, however, that in the interests of efficiency and avoidance of unnecessary effort by both the Commission and the carrier personnel involved, it would be advisable to amend section 212 to make possible elimination of unnecessary applications and Commission orders in such situations. This would be accomplished by amending section 212 to add the following proviso at the end of the first sentence: "Provided, That the Commission may authorize persons to hold the position of officer or director in more than one such carrier, without regard to the requirements of this section, where it has found that one of the two or more carriers directly or indirectly owns more than 50 per centum of the stock of the other or others, or that 50 per centum or more of the stock of all such carriers is directly or indirectly owned by the same person.' In addition, certain language changes will be required in the second sentence of the section, as revised, in view of the insertion of the new proviso. These are set out in full in the draft bill attached hereto. The need for an amendment to section 219 (a) of the act arises partly out of an apparent ambiguity of the existing language and partly out of the development and growth of certain new types of limited or specialized common carriers in the communications field concerning the operation of which a somewhat lesser degree of annual information may be necessary in order to insure effective Commission regulation. The first sentence of this section presently authorizes the Commission to require the filing of annual reports by all carriers subject to the act, a provision taken over from the Interstate Commerce Act, as amended. However, the second sentence of the section, which was added at the time the Communications Act of 1934 was adopted, speaks in mandatory terms and provides that such annual reports "shall show in detail" a long list of specific types of |