Mr. VAN DEERLIN. Thank you very much for this presentation. Mr. SHEEHAN. Thank you.

Mr. VAN DEERLIN. Mr. Hargrove is still in the penalty box. I know you have already been introduced, Mr. Hargrove, and we will be pleased to hear from you.

STATEMENT OF WADE HARGROVE, EXECUTIVE DIRECTOR AND GENERAL COUNSEL, NORTH CAROLINA ASSOCIATION OF BROADCASTERS

Mr. HARGROVE. Thank you, Mr. Chairman.

I will edit my statement as I go along in order to comply with the time contraints. I will try to resist the inclination to comment on every section of the bill on which the North Carolina broadcasters might have a view.

The Association of North Carolina Broadcasters consists of some 300 member radio and television broadcast stations and is among the three or four largest state broadcast associations in the Nation. H.R. 3333 represents a bold and imaginative step toward the long awaited elimination of unnecessary and wasteful regulation of the nation's radio and television broadcast industry. The broadcasters of North Carolina commend those responsible for the drafting and introduction of the bill and for their efforts in focusing national attention to these issues.

This is an enormous undertaking on which the subcommittee has embarked, and although we may disagree with many of the bill's provisions, we truly and sincerely commend you and the other members of this subcommittee for undertaking this project.

The interest in North Carolina in deregulation of broadcasting and in restoring order to the broadcast licensing process is well known to this subcommittee. NCAB appeared before the subcommittee in 1973 and the Senate Communications subcommittee in 1974 in support of the Broyhill license renewal bill. Those hearings were concerned with the extent to which a series of Commission and court decisions had created instability in the license renewal process and with the question of whether the public interest would be served by the extension of the length of the 3-year broadcast license term.

As the subcommittee is aware, both of those issues are still with us and, as demonstrated by the ambiguities of the Cowles decision of last year, the need for renewal legislation is as pressing as ever. Since those earlier committee hearings, thousands of dollars in legal fees and countless hours of valuable time have been expended by broadcasters in North Carolina and elsewhere, I might add, in the successful defense against frivolous renewal challenges.

It has largely been the private interests of the challengers and not that of the public which have been served by this burdensome process. Clearly, the time has now come for Congress to say "Stop, no more frivolous renewal challenges," and to bring the Federal regulatory folly which has accompanied this process to an end. H.R. 3333 would appear to do just that. To the extent the bill would extend the license period to an indefinite term for radio

immediately and for television eventually, the concern of broadcasters with the inequities of the renewal processs would appear to be obviated.

With this in mind, we urge the subcommittee, as debate takes place in coming weeks on various aspects of the bill, not to compromise this important provision. It is, in our view, the bill's single most salient broadcast provision.

North Carolina broadcasters support the deregulatory provisions of the bill. We are troubled, however, by the disparate treatment afforded television. Although we are familiar with all of the arguments about scarcity and impact which supposedly underlie the regulatory distinction being drawn between radio and television, that rationale, in our view, is flawed.

Why not experiment with freedom for both media? If broadcasters should perform as irresponsibly as the doomsday critics would suggest, then corrective legislation could be easily enacted. After all, we have had over 40 years of close Government supervision of both radio and television programing. Why not see what would happen without it?

We do not believe the skies will fall if Congress in its wisdom should opt for freedom rather than regulation. For Congress to do so would not be nearly so brazen or radical as was the adoption by the Founding Fathers of the first amendment to the Constitution. The printed press was the sole and exclusive means of mass communication at that time, and had the Constitution's framers paid any attention then to notions of scarcity and impact, we would never have had a first amendment.

We urge you to set all of broadcasting free now while the opportunity is here, not 10 or 20 years from now. We applaud provisions in the bill which would compel CATV systems to obtain retransmission consent for the carriage of radio and television broadcasting programing. It is inconsistent with fundamental precepts of fairness and equity for government to sanction the appropriation of property in the private sector without the consent of the property owner and without the payment of full and fair compensation for it.

If the marketplace is to be the cornerstone of new communications policy and legislation, we urge it begin with introduction of marketplace forces to cable television. I was recently told by a Charlotte television station that it was a member of a TV station cooperative which underwrites the production of high quality specials for broadcast in prime time.

On two occasions recently, I understand that, the Charlotte CATV system presented this programing-for which the Charlotte TV station paid $44,000-in advance of the scheduled date for local broadcast. The CATV system picked the programing off a distant TV station by satellite and scooped the local station with it. In so doing, the CATV system diluted the program's potential value for sale by the local station.

Of course, the same result could just as easily happen with radio. Surely, justice and fairness require that this kind of unfair competitive practice not be permitted to continue unchecked.

Section 532 of the bill would remove jurisdiction for review of Commission action on broadcast applications from the U.S. Court

of Appeals for the District of Columbia. We support this provision because it would make judicial review of Commission decisions more accessible and convenient to the local community and the broadcaster.

As distinguished and respected as the District of Columbia Court is, I do not believe it has cornered all of the Nation's wisdom and competence in communications matters.

Finally, while I am sure it comes as no surprise, North Carolina broadcasters are opposed to a spectrum tax. Notwithstanding the designation of it as a "fee," the extraction of some $150 million a year from the broadcast industry is hardly incidental to the scheme of broadcast regulation provided for in the bill. And to that extent, we respectfully submit it is plainly a tax.

Broadcasters and public interest groups alike are puzzled by the notion that freedom is something which Congress would appear to be willing to sell at a price to the broadcast industry. Let me add that I do not intend to in any way suggest that the drafters of this bill intended to imply that deregulation was something which was up for sale. We all know that it is not and that was not the intention.

With all due respect, however, we do not understand why broadcasting is forced to buy the freedom it deserves and, under the first amendment, to which we believe it is constitutionally entitled.

History has made us skeptical of taxes. It is a little comfort that the spectrum tax might be modest at the outset. So were the FCC's original license fees adopted in the early 1960's. So were social security taxes back in the 1930's and, of course, so were income taxes. It is the nature of taxes that they increase, and not withstanding the good efforts of this committee, we doubt future Congresses will have the will to resist the inevitable pressures to increase them.

Congress would unwittingly become broadcasting's silent business partner. Once the Federal Government gets its hands in broadcasting's pocket, we don't think it is likely to take it out. There are sound policy considerations, in our view, which militate against a spectrum fee or tax. A selected tax on the news media could become a pernicious political weapon. A President or congressional majority could increase it or lower it to punish or reward political broadcast expressions. The temptation to broadcast news and political programing pleasing to a President and a congressional majority would always be present.

In closing, I would add that broadcasters are growing increasingly apprehensive that they might in the end receive a spectrum tax with little or no deregulation at all.

On behalf of all North Carolina broadcasters, I wish to thank the subcommittee for its continuing concern for the regulatory problems which confront this industry and to commend the drafters of H.R. 3333 for precipitating this national debate on these important issues.

Thank you very much.

Mr. VAN DEERLIN. Thank you, Mr. Hargrove.

I know that my words have fallen like dust in recent months as I have attempted to persuade one witness after another that a fee is not to be confused with a tax. Having failed to make the case with

such long-time participants as Vincent Wasilewski and many others, I really will not renew the effort this morning.

Mr. HARGROVE. I understand, Mr. Chairman, and I understand your reasoning. But we think that the label is really irrelevant. The label is only relevant, perhaps to the manner in which the bill winds its way through the congressional process.

The bottom line is it will cost $150 million, and broadcasters are not particularly excited at the prospect of paying that. That is the essence of our concern.

Mr. VAN DEERLIN. I was otherwise impressed by your suggestion that we might go whole hog right now and go for full deregulation of both radio and television. You know the arguments on that, of

course.

Mr. HARGROVE. I do.

Mr. VAN DEERLIN. The scarcity principle on which regulation was justifiably based in 1934 demonstrably no longer applies to radio. Perhaps the same point cannot yet be made for television, but it might, and in fact, I think it almost certainly will be true after another 10 years at the pace technology has been going. Mr. HARGROVE. There are a lot of unused television assignments in our State, Mr. Chairman. The only constraints on activation of those channels are economic constraints-the same constraints which preclude entry into the newspaper business.

Mr. VAN DEERLIN. That is a very good point.

Mr. HARGROVE. I know that you have long been sympathic with that point of view.

Mr. VAN DEERLIN. Another consideration, of course, is the political policy of getting it done all at one time. You have heard and will hear yet today more witnesses who are appalled at the prospect of deregulation even of radio.

Mr. HARGROVE. Had the founding fathers held this round of hearings at the drafting of the Constitution, I would think those same concerns with respect to potential abuse of the first amendment would have been expressed. There are obvious risks in freedom. We are all cognizant of those risks.

Mr. VAN DEERLIN. I yield to the splendid member of this committee who represents North Carolina and is a co-sponsor of H.R. 3333. This legislation, as you know, is being carried by two princes and a pauper, and I am very happy to yield to Mr. Broyhill.

Mr. BROYHILL. I may have my name on the first page of this bill, but I don't have my name on that page which includes the spectrum fee, do I?

I would like to have your comments with respect to some difference in the spectrum fee as it applies to radio, on the one hand, and to television, on the other. The spectrum fee, it would appear to me, would not be all that onerous for the average radio licensee. However, for the television licensee it would be a substantial fee and would be a substantial portion of the revenues as well as the profits of the television operators.

Would you want to comment as to why radio licensees would oppose the fee as it is presently proposed, since it is not onerous? It is a fairly reasonsable fee.

Mr. HARGROVE. I agree. It is not onerous at this time for small market radio stations. Oddly enough, Mr. Broyhill, and to my

surprise I have not had a single radio broadcaster say to me that he would trade the deregulation which this bill brings for a new spectrum tax or fee.

And, I might add Mr. Chairman, that I do not mean in any way to be disrespectful in calling it a tax.

Mr. VAN DEERLIN. That is all right.

Mr. HARGROVE. Broadcasters think of it as a tax and they are now skeptical of it. They are concerned that every time the federal budget is going to need shoring up a bit, that someone up here in Washington is going to want to raise the spectrum tax and that they are going to look at the profits of the broadcast industry and say, well, if we can stick it to those fellows, let's do it.

Of course, there is a great misconception about the profitability of broadcasting. We all know that it is a very profitable business if you happen to be fortunate enough to own a VHF television station in a medium or large market. It is not all that profitable for small market radio stations.

As you know, Mr. Broyhill, I am part owner of a smalltown radio station along with my law partners. We have been in the business about 3 years and I have learned a lot more about broadcasting in those 3 years than I have in the 13 years I have practiced communications law. This business is not a bed of financial roses for small market broadcastes, and they are very concerned about this new

tax.

They don't believe there is a free lunch and they long ago learned to be suspect of people from Washington bearing gifts. Here again, I do not mean to be disrespectful in any way. I am simply passing along and communicating to you the attitude which exists out there in the provinces.

These small businessmen look at the rewrite effort from an economic point of view. Human nature being what it is, it is understandable that they would do so. Many of them have invested their life's fortunes and they have mortgaged their lives and their children's future in the acquisition of their stations. They do not want to see a new tax introduced into this business. They think it would diminish the value of their investments and would jeopardize what they have tried to build.

Mr. BROYHILL. Let's look at the impact the fee would have on the television stations in a State like North Carolina. As I pointed out in your introduction, our State is a State where we have relatively small markets. We don't have a large metropolitan area as other States might. Charlotte is our largest community, and you have a number of VHF stations and UHF stations in relatively small markets, such as Wilmington, Greenville, New Bern and so forth. These are relatively small towns of less than 100,000 people. What impact would the fee have on those stations and their ability to continue to provide the wherewithal for local programing of public affairs, news and so forth?

Mr. HARGROVE. I am not sure what the specific amount might be in any particular market. I think in some of the smaller markets in television in North Carolina, the fee, as I recall-and I could be wrong about this, but to the best of my recollection, the fee would be something like $20,000. That is not an insignificant amount. Mr. VAN DEERLIN. Will the gentleman yield?