rates those concerns represent a very small fraction of the major regulatory areas that lie immediately ahead of the Commission.

Such areas of Commission activity, fairly epochmaking in their significance, will shape the nature of communications in this country for generations to come. Needless to say, this Commission should be properly staffed if it is to be able to provide the essential measure of regulatory capability to meet these new challenges and to provide these new as well as other continuing services, in the public interest.

NO INCREASE IN STAFF REQUESTED FOR FISCAL YEAR 1967

We must start our review with recognition of the fact that in light of personnel and staff dynamics, the appropriation of the same amount of funds for fiscal year 1967 as for current fiscal year 1966 will result in a reduction of 18 man-years in Commission staff. It should here be emphasized that our budget estimates for fiscal year 1967 reflect fully the Commission's desire to do its share in meeting the overall budgetary objectives of the Government. The Commission has felt that it could very effectively use staff increases in many of its program However, in recognition of basic governmental budget policies, no increases for fiscal year 1967 were asked of the Congress. The Commission actually went beyond just holding the line in not asking for an increase; its budget estimates for fiscal year 1967 proposed a reduction in average employment of 11 man-years. This was done in order to avoid asking for additional funds to cover the cost of withingrade salary increases required by statute. The cost of these increases is being absorbed through the reduction in staff of 11 man-years.

FURTHER REDUCTION IN STAFF TO MEET PAY INCREASE COSTS

With respect to the further reduction proposed by the House, the last pay-increase legislation approved by the Congress became effective in this agency on October 14, 1965, for approximately 9 months of fiscal year 1966. The funds now approved by the House would require that the Commission pay those increased compensation costs for a full 12 months in fiscal year 1967 with exactly the same appropriation it received in fiscal year 1966. Since the $181,500 requested to meet these added pay costs is being disallowed, the Commission will have to reduce the number of employees on its rolls by another 18 man-years in order to have funds available to meet these added payroll costs for existing staff, over and above the 11 man-years already subtracted from the 1966 totals.

GROWTH IN COMMON CARRIER FIELD

I turn now to the particular areas of challenge and expanding Commission responsibilities which base our today's request that you restore to us the fiscal year 1967 budget proposed by the executive department. Our primary area of Commission responsibility—the common carrier field-is growing at an extraordinary rate. budget request for fiscal year 1967 must be considered in light of the accelerating number and complexity of developments taking place in both the domestic and international areas of common carrier regulation.

Our

COMPREHENSIVE STUDY OF BELL SYSTEM

In the next few weeks, as you know, the Commission is scheduled to proceed to the evidentiary phase of hearings concerning the overall rate of return, revenue requirements and internal rate structure for interstate services provided by the Bell System companies. The Commission on the basis of voluminous data before it and a continuing regulatory concern in these areas found it both necessary and appropriate to undertake a comprehensive on-the-record study of the Bell System. The pending proceedings are intended to deal with and resolve questions as to the proper basis upon which rate levels and rate relationships should be established and maintained for the several classes of interstate services furnished by the system.

Complete hearing consideration must be given, in this connection, to cost of service, marketing, competition and other ratemaking factors in a context which has never arisen in the past. In addition, the pending proceeding is designed to help us resolve fundamental and pressing problems of concern to both the FCC and all State regulatory commissions. These problems relate in particular to the principles and procedures employed to allocate telephone plant and expenses between the State and interstate ratemaking jurisdictions. The resolution of these questions could have profound economic impact, involving many millions of dollars, on the cost of both intrastate and interstate services.

The Commission is determined to arrive at a fair and orderly disposition of these hearings at the earliest possible date. We have designed our procedures to effect maximum expedition of the proceedings and thus far all interested parties have been cooperating to this end. Needless to say, the complete achievement of these hearing objectives requires that we have full use of our staff and related resources.

SATELLITE COMMUNICATION PROBLEMS

Turning to another area of concern, rapid and dramatic developments have been taking place in the area of satellite communications. These developments promise to have far-reaching effects upon the future of our $30 billion telecommunications industry and all persons who use the services of this industry in their daily lives.

This technological progress requires intensive study and policy formulation by the Commission in order to assure proper direction to its application in the public interest. For example, matters requiring immediate attention include:

(a) The need for a decision as to the proper role of Comsat vis-a-vis the terrestrial carriers and the public. Is Comsat to serve such carriers only, or should it also be permitted to provide service directly to the using public? What would be the effect of a decision on this matter on the level of charges and the quality of service? How would the future profitability, if not the viability, of both the terrestrial carriers and Comsat be affected by such a decision?

(b) Who should be licensed to construct and operate the additional earth stations needed within the United States to provide service? Should it be Comsat exclusively, one or more of the terrestrial carriers, or a combination of Comsat and the terrestrial carriers? Competing applications from Comsat and one or more terrestrial carriers are now on file for authority to construct such stations in Puerto Rico area and

in the southeastern part of the United States. Additional competing applications to construct such stations in other areas are expected in the near future.

(c) How should the rapidly growing needs for overseas facilities be met? Shall it be by satellite or the new high capacity transistorized cables, or by a combination of them? What standards should be applied in resolving this problem? We now have pending before the Commission applications for both a transistorized cable and for satellite facilities to provide additional needed capacity between the United States and Puerto Rico.

(d) What role should the Communications Satellite Corporation play in meeting communication needs within the United States? This problem has two aspects. Should such needs be met by common carriers, and if so, by which of such carriers? Secondly, shall we, as a matter of policy, permit individual or groups of private companies to use the communications satellite technique to meet their communications needs, for example, the interest of ABC in seeking to provide its own facilities via satellite for distributing network programs to affiliated stations around the country.

(e) What are the implications of satellite technology upon the present broadcasting services-both commercial and educationaland how can this new technology best be channeled to further our domestic and international objectives in the communications field?

USE OF COMPUTER IN TELECOMMUNICATION SERVICES

Equally important are the regulatory implications generated by the rapidly expanding uses of computer and data processing services. The marriage of computer and telecommunication facilities in the provision of a large variety of these services present basic policy questions as to the extent to which such services may be subject to regulation under the common carrier provisions of the Communications Act or may require further legislation for appropriate regulation in the public interest. We are currently engaged in studies of this entire area. Among other things, we shall seek to determine whether and under what circumstances competition or Government regulation will better serve the public interest in the most effective exploitation of this advancing technology.

WATS AND TELPAK SERVICES

Other important common carrier matters of current interest involve the development and application of new concepts in established services such as the WATS and TELPAK proposals that have been before us.

FCC COOPERATION IN INTERNATIONAL USES OF RADIO

In another related area of concern, the Commission has played and continues to play a vital role in the expression and protection of U.S. interests in international matters involving the many uses of radio. U.S. teamwork with other nations has ranged from coordination of frequency allocations and the exchange of related data, to supporting and strengthening international pacts for orderly distribution and operation. During 1965, for example, the Com

mission prepared for 42 international conferences, participated in 28, and furnished chairmen for U.S. delegations to 7 such meetings.

UTILIZATION OF UHF PORTION OF TV SPECTRUM

The broadcast and related fields provide other highly significant complex areas of current Commission regulatory activity. These include our continuing efforts to stimulate the wider growth of the UHF portion of the TV spectrum so as to achieve a more effective system of national television. Stimulated by the expanding effects of the all-channel receiver law, an increasing number of UHF applications is being filed with the Commission which require of course our earliest and most thorough attention possible.

VARIOUS BROADCAST PROBLEMS UNDER STUDY

The Commission is now also exploring proposals to establish subscription TV on a regular, nationwide basis as a possibly valuable alternative to our traditional system. We are also engaged in other proceedings looking toward revision of our rules affecting multiple ownership of TV stations. We are also studying requests of certain clear channel AM stations to operate with superpower of up to 750 kilowatts, as well as other AM proposals to expand and regularize pre-sunrise operation. We have adopted a revised program form for applications and new logging rules for AM and FM stations, and the Bureau of the Budget now is reviewing the new application form for TV which was recently approved by the Commission. The Commission, incidentally, is reviewing its processing delegations to the staff in light of the changes in these forms.

DEVELOPMENT OF EDUCATIONAL TV

The Commission continues also to be concerned with the fuller development of educational television. During the past year operating ETV stations reached the 100 mark, and within the next 5 years we hope to see at least 300 stations on the air providing a nationwide educational service. For the next year, Congress has authorized approximately $19 million for grants-in-aid under the ETV Facilities Act, and we are cooperating closely with HEW to foster this aspect of educational-TV development. Under our revised UHF allocations plan, we have made specific provisions for over 750 ETV stations, and hope to be able to provide additional such facilities as the need may arise. In addition, we anticipate an expanding educational use of our new 2500-megacycle instructional television fixed service for which we have just established a joint Commission-Industry Advisory Committee. The Commission anticipates increasing activity in the ETV field to insure that there is the fullest utilization of the existing potential for the early establishment of operating ETV facilities around the country.

Senator, I must interpolate a thought here, if I may. Educational TV, as such, will, of course, be a most valuable service to the public. But Educational TV can also be a very important stimulating force in affecting all the TV programing, and it is for that reason, as a communications authority, we have an interest in something which, perhaps, has its basic roots in education.

REGULATION OF CATV SYSTEM

It should further be pointed out that since the date of preparation of these fiscal year 1967 budget estimates, the Commission has been compelled by rapid developments in the field to adopt a broad plan for regulating community antenna television systems. This regulatory program has been designed to maintain sound communications policies in the allocation of television services and to insure the effective integration of CATV with a fully developed television service to the benefit of the American viewing public.

The development of effective, equitable, and timely CATV policies, rules, and enforcement procedures is essential to the effective development of both the TV medium and this CATV supplement to it. The impact on the workload of the Commission of the required review of multiple CATV proposals and pleadings from all interested parties, as well as the need to conduct hearings where shown to be required by the public interest, is expected to be serious indeed.

Clearly, CATV in the future will require increasing attention and will impose additional demands on Commission resources. The question of whether a supplemental appropriation request will be required in fiscal year 1967 has not been resolved and the House Committee was informed that such a request remains a possibility. To the extent that our original estimates are reduced, the probabilities of the need for supplemental appropriations are increased. Most certainly, the Commission could not carry out its full responsibilities in the CATV area if a further reduction in its present staff is required.

REDUCED BACKLOGS DUE TO USE OF COMPUTER

The report of the House committee makes appropriate reference to the fact that the Commission has succeeded in reducing backlogs of pending applications in the safety and special radio services through computerization and, at the same time, has achieved reductions in staff in some of these areas. We are pleased with such progress in our computer system as well as in our efforts to reduce application backlogs whenever and wherever possible. It must be pointed out, however, that these factors had already been taken into consideration when the fiscal year 1967 budget estimates were prepared. Were it not for the fact that the Commission anticipated additional economies in fiscal year 1967, our original estimates of needed manpower, of necessity, would have been significantly higher. The Commission does not believe that it can at best look to the computerization program to provide a further reduction of any substantial part of the 18 man-years for which we seek a restoration of funds for fiscal year 1967.

SUMMARY OF NEED FOR RESTORATION OF HOUSE CUT

In summary, the Commission has submitted to the Congress an extremely tight budget for fiscal year 1967 and has even reduced its employment estimates by 11 man-years to provide funds to pay required within-grade salary increases. The only increase requested was designed to cover the $181,500 necessary to pay the increased costs resulting from the 1965 pay legislation approved by the Congress. A cutback of $181,500 would require the Commission to make a further reduction of 18 man-years of employment at a time when it is