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.
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
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.
CONCLUSION
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.