In re Application of STATE MUTUAL BROADCASTING CORP., WORCESTER, MASS.
For Construction Permit for a New Television Broadcast Station
File No. BPCT-4109
FEDERAL COMMUNICATIONS COMMISSION
15 F.C.C.2d 736 (1968)
December 5, 1968 Adopted
[*736] The Commission, by Commissioners Hyde, chairman; Bartley, Robert E. Lee, Wadsworth, Johnson, and H. Rex Lee, with Commissioner Johnson dissenting and issuing a statement, granted the application of State Mutual Broadcasting Corp. for a construction permit for a new television broadcast station to operate on channel 27, Worcester, Mass., subject to the following conditions:
1. If, as a result of subsequent Commission action, Bernard E. Waterman reacquires his interest in station WAAB and station WAAB-FM, Worcester, Mass., he shall sell his stock and debentures and terminate his relationship as general manager of the television station.
2. If, as a result of subsequent Commission action, Waterman Broadcasting Corp. reacquires its interest in station WAAB and station WAAB-FM, Worcester State Mutual Life Assurance Co. of America shall not exercise its option to purchase the stock of Waterman Broadcasting Corp.
3. During the time that Richard C. Steele and Robert W. Stoddard retain their interest in station WTAG, Worcester, Mass., they shall not participate in any of the activities of State Mutual Life Assurance Co. of America with respect to the control and operation of the television station.
4. Grant of the application shall be without prejudice to whatever action the Commission may deem appropriate as a result of the pending proceeding in docket No. 18110.
5. Operation with effective radiated power in excess of 1,000 kw after September 1, 1970, is subject to a further extension of consent by Canada.
This grant of a construction permit for channel 27 in Worcester, Mass., to the State Mutual Broadcasting Corp. adds yet another document to the growing pile of evidence of this Commission's insensitivity to the problems of broadcast media control in America.
The corporation has asked for the permit. It has been granted. But for the overwhelming vote of approval by a majority of this Commission, I would have assumed that a mere description of the applicant's media position would have been eloquent argument enough to insure its disapproval. Apparently not. Nevertheless, in order to keep everyone posted on the current state of affairs at the FCC -- reformer and practitioner alike -- I think it may be useful to set forth the facts of this case.
1. There is to be no licensee -- in the sense of an owner to whom this Commission can look for responsibility for the station's operation. [*737] The State Mutual Broadcasting Corp. is no more than a piece of paper on file in the State of Massachusetts. All of its voting stock is held by another corporation -- the State Mutual Life Assurance Co. of America. State Mutual Life, in turn, has no capital stock; it is owned by its policyholders. It is, thus, perhaps an extreme illustration of the trend to institutional ownership of broadcast media -- ownership by banks, trust funds, estates, universities' endowments, unions' pension funds, mutual funds, brokerage houses, and so forth. "Who's in charge here?" is an increasingly serious, frustrating, and disturbing question that echoes throughout our industrialized and institutionalized society. It has special significance, however, when it comes to assessing responsibility for the information and opinion fed into the mainstream of a people dedicated to self-government by informed citizens.
2. The problems of conglomerate corporate ownership are also raised by this grant. That is, the risk that a mass-media subsidiary may be used to serve the public information, advertising, or public relations interests of its parent -- rather than as an independent source of information and opinion. This issue was explored by the Commission in the ITT-ABC proposed merger ( ABC-ITT, 7 FCC 2d 245, 278, and ABC-ITT merger, 9 FCC 2d 546, 581), and was involved in the recent RCA-Huntley case ( National Broadcasting Co., 14 FCC 2d 713, 718, 741 (1968) (dissenting opinion)). State Mutual Life is, of course, an insurance company. The insurance industry is a multibillion-dollar industry in this country that is not immune from politics and economic involvement in serious public policy issues: medicare and health insurance, the relation of auto insurance to this country's automotive subgovernment, the investment practices of insurance companies, the income tax treatment accorded insurance companies and the policyholders of various plans (State Mutual Life's property taxes are involved in this very case), and the State and Federal regulation of the industry generally -- to name a few. But, as with most insurance companies, that is but the beginning. State Mutual Life has stock and bond holdings in a wide range of interests totaling some $500 million. To the extent State Mutual Life is to be thought of as personified in its officers and directors, their interests are almost equally broad. There are 120 corporate officers. Just to list the interests of the 18 principal officers and directors takes 11 pages in an FCC form. Each officer is in a position to, however, subtly, influence the programing of the media subsidiary in ways that reflect the economic interests of the other corporations with which he has relationships -- as well as his own personal economic interests. (See, for example, the recent extreme case in which one of broadcasting's largest and most powerful conglomerates (RCA) saw nothing wrong in one of broadcasting's best known newscasters (Chet Huntley) using the media outlet (the NBC radio network) to attempt to shape the views of tens of millions of Americans to a position on the Wholesome Meat Act that tended to serve his own interests in the cattle and meat business, and those of his business associates, cited above.)
3. The grant of this permit will create a concentration of control of media in Worcester, Mass., that, at a minimum, is inconsistent with recent actions of the U.S. Department of Justice. Two of the [*738] directors of State Mutual Life have substantial interests in the Worcester Telegram & Gazette -- a company which publishes Worcester's only two daily newspapers with a combined daily circulation of 157,000. Robert W. Stoddard is chairman of the board and a 5-percent stockholder of the corporation. Richard C. Steele is the president and a director of the corporation, and the publisher of the paper. We may take official notice of the fact that men occupying such positions are in a position, between them, to select the personnel and set the editorial policies of the paper. On May 8, 1968, the Justice Department filed before this Commission an opposition to a transfer application in a case involving the acquisition of a television station in Beaumont, Tex., by individuals who controlled the local papers. Subsequently, on August 1, 1968, the Department filed with this Commission a brief in our inquiry regarding a proposal to limit the number of full-time stations a single individual could acquire in the same market -- docket No. 18110, FCC 68-332, March 28, 1968. The Justice Department urged that the proposed rule was too soft: That it should also consider divestiture, and that it should also take account of joint newspaper-broadcast ownership in the same community. Finally, only last week, we were informed that the Gannett newspaper chain had sold station WREX-TV in Rockford, Ill, for over $3 million profit, in accordance with a threatened Department of Justice suit because of their common ownership of two newspapers in that city. To approve an application like the one before us without a hearing -- in which directors of the parent corporation of a television station control the only newspapers in the same town -- seemingly flaunting the responsibly conceived and tendered positions of the U.S. Government's expert agency on the subject, is a discourteous and reckless act inconsistent with simple principles of comity and decency between agencies of the same government.
4. This acquisition will be an undesirable addition to the present media holdings of State Mutual Life. The company already has a 3.1-percent interest in the Sonderling Broadcasting Corp. (a chain of white-owned, Negro-oriented stations). It has options to purchase 50,000 more shares, which would give it a 7.5-percent interest. Sonderling owns six AM stations, four FM stations, and two television stations located in such politically significant centers as Washington, D.C. (the Nation's capital), New York and Los Angeles (the Nation's two largest markets), Albany (the State capital of New York), and so forth. State Mutual Life also holds warrants to purchase up to 10 percent of the Waterman Broadcasting Corp., which owns Waterman Broadcasting Corp. of Tex., which owns KTSA and KTSA-FM, San Antonio, Tex., and which, in turn, is owned by Mr. and Mrs. Bernard Waterman. He is a director of the State Mutual Broadcasting Corp., and channel 27's proposed general manager. (Waterman also owned stations in Worcester itself -- in ambiguous status at the present time -- that raise separate, numerous, and serious issues discussed later.) Another director of State Mutual Life, Mr. Julian B. Bondurant, is president of the Memphis Community Television Foundation, the licensee of WKNO-TV, channel 10, Memphis, Tenn. (a noncommercial educational station). (State Mutual Life, through Sonderling, [*739] it should be noted, has an interest in WDIA and WTCV (AM and FM) in Memphis.) State Mutual Life at one time held stock in CBS, although it claims now to have sold it all.
5. The grant of the application is in direct violation of this Commission's own interim policy, announced on March 28, 1968, that action will be withheld on all applications filed after April 3, 1968, where a grant would result in common ownership, operation or control of more than one multilimited-time broadcast station in a market. This application was filed on April 11, 1968. It would result in the common ownership referred to. The common ownership comes about because of State Mutual Life's relationship to the Worcester Telegram & Gazette, Inc., referred to earlier. (State Farm Mutual's directors, Richard C. Steele and Robert W. Stoddard, are president and chairman of the board, respectively, of the Worcester Telegram & Gazette.) For, as has come to be increasingly common in this country, we find that the Worcester Telegram & Gazette, owner of the only daily papers in town, also owns one of the four AM radio stations in the same city. The Commission has quite willingly and gratuitously gone through some convoluted, imaginative legalisms to fix-up this defect for its applicant. The fact remains that the application, as presented, does violate the Commission's recently declared policy. It is also true that, even after the condition, it still violates the spirit (and, in my view, the letter) of the policy. But for the willing assistance of this Commission -- an assistance that stands in stark contrast to the rigid resistance accorded such representatives of the broader public interest as the United Church of Christ (renewal of WLBT), John Banzhaf (failure to enforce the cigarette fairness ruling), the Ford Foundation (failure to act meaningfully upon its, or any other, proposal for funding public broadcasting or free interconnection), and Mrs. Stephanie A. Riopel in this very case -- see item 7 below -- the application would, of course, have been refused. What is the condition?
During the time that Richard C. Steele and Robert W. Stoddard retain their interest in station WTAG, Worcester, Mass., they shall not participate in any of the activities of State Mutual Life Assurance Co. of America with respect to the control and operation of the television station.
It's scarcely worth the Government paper it's printed on. What does "participate" mean? Are they going to stop participating in the affairs of State Mutual Life? No. Are they going to stop associating with the directors and managers of the new television station? No. Are they going to stop running their media oligopoly -- newspaper and AM station -- in Worcester? Probably not. Is there going to be any doubt whatsoever of the policies they would like to see the television station espouse? Of course not. Is there any reasonable probability that the television station will make any significant new offering into the marketplace of ideas that exist in Worcester? No. The public interest that the communications act holds up as our guiding star offers little light, but it is enough for me to see the path that we should follow through this jungle. That the grant of the application also requires us to violate express policies of the U.S. Department of Justice and this very Commission is simply frosting on what should already be a very obvious cake.
[*740] 6. The saga of Bernard E. Waterman, and the ambiguous status of his ownership of broadcast properties in Worcester, raise questions as to his suitability to be the general manager of the State Mutual Life television station, and requires the Commission to impose additional conditions that render the whole transaction ludicrous. Bernard E. Waterman may own, in addition to the San Antonio stations, two stations in Worcester itself. These are WAAB and WAAB-FM -- resulting in three of the six AM and FM stations in Worcester being under the control of major officers and directors of State Mutual Life. One must say that Bernard E. Waterman may own these stations because of the following series of events. Waterman wished to transfer the stations to a corporation called WAAB, Inc. -- the ownership of which is in question. The applications for assignment of license were approved by this Commission on March 27, 1968. Waterman Broadcasting Corp., 12 FCC 2d 295 (1968). Subsequently, the ownership of another Worcester station, WORC, Inc., filed a notice of appeal to the U.S. Court of Appeals. WORC, Inc. v. Federal Communications Commission, D.C. Cir., case No. 21, 795. Before the court could act on the case, the Commission asked for it back -- a remand. This was granted on October 25, 1968. WORC had charged that there had been a misrepresentation as to the interests of Atlantic Recording Corp. (one of the major producers of the principal programing heard on American radio stations today) in WAAB, Inc. The matter is now before the Commission. It is at least possible that we might rescind the assignment and order Bernard E. Waterman to reacquire his interests in WAAB and WAAB-FM in Worcester. Waterman is one of the few real people to own an interest in State Mutual Life Broadcasting (nonvoting stock and debentures only; all voting stock is held by State Mutual Life). In the event he reacquires WAAB and WAAB-FM he will, of course, be in clear violation of our March 28, 1968, rule. Moreover, because State Mutual Life holds options on 10 percent of Waterman Broadcasting Corp., it too would clearly violate the rule. Once again the Commission skirts these problems with some ingenious conditions to its approval. If Waterman gets his stations back he has to sell his channel 27 interests, and cannot be its general manager. (And just who, then, does this Commission believe is going to run the station? Or doesn't it really care at all? Needless to say, no alternate has been selected.) Moreover, State Mutual Life has to promise not to exercise its option to acquire 10 percent of Waterman Broadcasting. As in the case of Steele and Stoddard, of course, there is no reason whatsoever to believe that Waterman would not continue to carry great influence, in fact, in the operations of channel 27.
7. Finally, as if all this were not enough, this Commission is brushing off a citizen complaint regarding State Mutual Life without even publicly acknowledging its existence. Stephanie A. Riopel, a resident of Worcester, filed an objection to a grant of this application. She charges that State Mutual Life's property in Worcester is only assessed at 25 percent of its value and as a consequence the company allegedly does not pay a fair share of the taxes in Worcester -- an issue about which the people of Worcester will receive very little information, one can assume, from channel 27, WAAB, WAAB-FM, [*741] WTAG, and the Worcester Telegram & Gazette. She also alleges that the radio station and newspaper in Worcester are under the monopolistic control of Robert W. Stoddard, whom she identifies as a director of the John Birch Society. We are advised by our staff that, "the Broadcast Bureau does not believe that the letter raises any substantial question about the qualifications of the applicant. * * *" The majority obviously agrees. I do not. I believe it is not only insulting, but irresponsible, for us to ignore such a complaint.
This is not represented to be a thorough review of the application before us. It is based on my most cursory examination of the file and reports from the FCC staff. I have no way of knowing what objections to this application might be raised by an investigation and hearing. But it is a sufficient review, I believe, to give a little insight into the present level of concern at this Commission about media ownership.
Media ownership and control in Worcester may very well warrant some action from this Commission. I am confident, however, that the cure is not to be found in turning over channel 27 to the State Mutual Life Broadcasting Corp. I dissent.