think we can, consistent with out duties, be moving parts of our establishment from place to place. We only recently got through a program of getting into two buildings. It would seem to me to be very, very unfortunate if we have to start breaking up again.

Senator MAGNUSON. Yes. When you get a nice, new place, you will need less people, because those that are working have better conditions, and will be more efficient.

LIAISON WITH BUREAU OF STANDARDS ON CHANNEL WORK

Senator ALLOTT. I have one question. I want to go back to the line of questioning propounded by Senator Holland. This is relative to channels.

To what extent do you make use of the Central Radio Propagation Laboratory of the National Bureau of Standards in your channel work? Mr. HYDE. We keep a close liaison with them for the purpose of getting information on characteristics of channels and usefulness. I could ask our chief engineer to discuss that. Mr. Renton.

Mr. RENTON. We make great use of their information on propagation, and their methods of calculation. But so far, in my office at least, we have not made use directly of their recommendations for, say, UHF or VHF television, because their plans do not fit the way the Commission might operate. In other words, they will tell us to do certain things, to get more stations in, but generally this is quite impractical, because it requires a great change in receiving equipment, and will in certain instances give more channels, but certain areas will receive less service than they did before.

In other words, the plans they have may be good, scientific plans, but will not necessarily work in practice.

This is the fault.

Mr. HYDE. Could I make an observation?

We have to take into consideration many factors and elements, such as the distribution of population, economic facts of life. The scientist is concerned only with radio propagation, and can think of engineering setups, which we cannot just automatically approve. But we do receive and make good use of the information they give us, the characteristics of propagation, as Mr. Renton mentioned.

Senator ALLOTT. I was just wondering to what extent you utilized their facilities.

I realize that you don't see eye to eye lots of times. But apparently they have some very capable people.

Mr. HYDE. I am sure they do. I think our liaison with them has been very good over the years.

Mr. RENTON. Very good.

Senator ALLOTT. Fine.

HOUSE REPORT, PREPARED STATEMENT, AND ADDITIONAL JUSTIFICATIONS

Senator MAGNUSON. All right.

Kindly insert in the record at this point the House report, statement by Chairman Henry, and additional justifications.

(The report, statement, and justification follow:)

HOUSE REPORT

The $17,338,500 recommended for salaries and expenses of this Commission i the same as 1966 and is $181,500 less than the budget estimate. The FCC has made tangible progress in using machine techniques to speed service in application processing and to reduce manpower requirements. This greater productivity and efficiency is expected to continue in 1967 and should enable the Commission to make savings that can be applied to areas of greatest concern.

Among the several significant activities before the Commission are the current investigation of the rate structure of the American Telephone and Telegraph Company, the regulation of the Community Antenna Television and Relay Services, and measures that may be necessary to facilitate the growth of UHF

stations and their use in educational television.

Revenues paid by telephone users amounted to almost $3.1 billion for the calendar year 1965. The Commission has made substantial progress on behalf of American Telephone users. The FCC was able to negotiate a reduction of the Bell System interstate rate applicable to night, Saturday and Sunday service resulting in savings to the public of $100 million annually. A further examination and investigation of telephone rates is continuing.

STATEMENT OF CHAIRMAN E. WILLIAM HENRY, FEDERAL COMMUNICATIONS

COMMISSION

Last year in making this presentation we went into extensive detail in an effort to place in perspective this agency's substantive areas of concern. Not surprisingly, most if not all of those issues are still with us this year. Some are in sharper focus; others are less so. And they will take their share of the discussion this morning. In this year's presentation, moreover, we have taken a cue from the Administration's concern for improved and more economical agency operation. There is in this statement, consequently, more emphasis on the management aspects of FCC operations than has been the case in recent years.

Congressional as well as the Presidential interest in cost reduction and improved management has resulted this year in more than the usual amount of budgetary introspection within the Commission and its staff. We have discovered no eternal truths—either about ourselves or our relationships with the Bureau of the Budget or the Congress-but we are reasonably certain that we come to you this year with a clearer understanding of our goals, and how to go about achieving them. In fact, our budget request this year, while it does show some shift in emphasis, does not request any increase in positions. It does, as you will note, call for a slightly lowered average employment. The very slight net dollar increase required is necessary to do nothing more than meet the cost of the most recent pay-increase legislation.

The Commission is aware that, due to basic governmental budget policies, this budget submission is significantly lower than the FY-66 request. This, in our view, makes all the more compelling the need to obtain our request in full, particularly, in view of the constantly enlarging areas of significant Commission responsibility. The Commission at the present time is experiencing an expansion of its basic regulatory responsibilities which-together with a steadily growing caseload of applications in all regulated services-is perhaps unprecedented in our entire history. CATV, with which you gentlemen may now be more familiar than you might have been a year ago, is probably the best-but only oneexample. Other areas of new or expanded activity and responsibility include the rate-making hearings involving AT & T, a sizeable step-up in Comsat and other international communications activities, greater efforts toward the fuller development of UHF broadcasting and educational television, and several important television regulatory matters.

Nevertheless, in recognition of the government-wide budgetary situation, this request, which proposes to continue operation at essentially the President's 1966 level, reflects the Commission's desire to do its share in meeting the overall budgetary efforts of the government.

In view of the continued dynamic growth of common carrier activities, which encompass domestic rate regulation and satellite and international communications, we are proposing some modest internal adjustments within existing position figures to provide some additional support for the staff handling these activities. Needless to say, there is a practical limit to this sort of internal adjustment and what can effectively be accomplished by this means without creating weaknesses in other areas of Commission activity. I am sure this matter will be discussed more fully later in the hearing as we go through the various sections of our budget.

I would like to turn now to some of the management problems which confont the Commission and briefly discuss some of the projects we have initiated in attacking these problems. The sheer volume of work involved in processing the applications of the vast numbers of radio spectrum users and common carriers has often kept the Commission from devoting sufficient time to the careful deliberation that leads to the establishment of sound policy, and to the drawing of rules before the fact rather than after. In addition, because of budgetary limitations, the Commission historically has been unable to staff itself adequately with sufficient numbers of well trained economists, researchers and statisticians. As a result, the Commission often has been unable to provide itself with an adequate data base to assist in the identification of priorities and to forecast with full confidence its requirements for staff.

The first of these difficulties we are beginning to remedy. Our report to you this morning cites tangible evidence of the progress we are making toward using machine techniques to reduce manpower requirements, and to speed service in application processing. The second difficulty we are moving gradually to overcome. The Common Carrier Bureau has recently added some economists and statisticians to its staff. Our recent reorganization of the Safety & Special Radio Services Bureau should also add to its capacity for analysis and rulemaking.

In addition we have moved to create, in line with the expressed wishes of the President, a planning-programing-budgeting arrangement within the Commission. This is being brought about through additional staff assignments and the reallocation of certain positions. These arrangements should assist the Commission in the further development of long-range forecasts and in the preparation of more comprehensive statistical, budgetary, and economic analyses. These, in turn, will constitute a sounder base for formulating goals, making decisions and analyzing results. In this connection, I should add, our budget process is being developed into a year-round instrument of more effective management—and our budget format should soon begin to reflect this development.

Our intent is to achieve nothing less than the forward program planning envisaged by the President, which represents a logical step toward increasing the effective management of the Commission. We are confident that our efforts will put us in a much sounder position to develop and implement our programs. will also permit the Commission to document our budgetary needs more thoroughly than before.

It

In achieving the better deployment of our staff, we are taking a double-barreled approach. In some areas-Safety and Special Radio Services Bureau, for example—we are upgrading the professional level of our staff through more efficient utilization of attorneys and engineers. We are also increasing the professional staff slightly in this area in order to deal effectively with the backlog of policy matters which have developed over the years. At the same time, in other areas, we are reducing the number of professionals now involved in more routine matters, and substituting in their place clerical employees who are qualified to perform such non-professional tasks.

Our future program contemplates a greater attention to this goal of using professionals only where their use is fully justified. Thus, we have recently created a Law Career Advancement Program whose objective, among other things, is to define more clearly those positions actually requiring the skills of an attorney. Where feasible we will replace attorneys with qualified, competent non-professionals. We are doing the same for engineers. Our people are working to identify those positions in which technicians rather than engineers may be used to do the work, permitting engineers on the staff to focus instead on work requiring professional expertise.

This double-barreled approach should result, therefore, in more efficient manpower utilization and a higher quality of professional output.

We are also moving steadily ahead in the development of a management information system which is proving increasingly effective in furnishing us with tools for better decision making. I have with me, for example, a farily complete analysis of Broadcast Bureau application processing which measures performance against goals. We will be happy to make copies of this analysis available to the Committee this morning. We intend to refine this approach further, and use it throughout the Commission wherever it promises to be useful.

Beginning this past June the Commission has initiated a bureau by bureau, office by office review of our organizational structure. Our intention is to reorganize our resources so as to permit their optimum utilization. At the same time we want to reduce the number of organizational units to the feasible minimum. Substantial progress to date has been made toward that goal in those offices reviewed to date; namely, the Office of Executive Director, and the Common Carrier and Safety and Special Radio Services Bureaus. Thus far the number of

organizational units at the divisional level and below has been decreased from 21 divisions to 17 and 46 branches to 36. We expect to continue this progress steadily throughout the remaining bureaus and offices-not only reducing the number of units, but also bringing them more closely in line with operational requirements.

Greater productivity and efficiency continue as primary agency goals. You will note as you examine our budget that for the first time in many years manpower requirements for application processing in certain services are declining absolutely. Our staff, after some initial difficulties, has achieved greater manpower savings, and achieved them sooner, than first anticipated through conversion to electronic data processing methods. We have in fact begun for the first time to capture one of the major advantages of our computer program by achieving definite and significant savings in clerical manpower. I would reemphasize, however, that our need for a computer was not and is not justified on manpower savings alone. Backlogs in the Safety and Special use categories are down; we have current, more accurate and usable license information; and we will be able to furnish increasing amounts of time-saving information to our field staff in coming months.

We first put work on our computer in March 1964. In the 24 months since then the computer has eliminated 10 man-years in Citizens and Amateur Radio Division and 2 in Broadcast Ownership. Based on our experience to date we anticipate that before the close of FY-66 the number of clerical staff devoted to processing marine radio applications will drop from 11 to 5; then, hopefully, to 3. This would be almost twice the manpower saving we had first hoped to achieve in this unit in 1966. Aviation radio application processing staff also is subject to reduction, and we anticipate a saving of at least 2 positions by the end of the current fiscal year. At the same time we are happy to be able to estimate that our backlogs in these areas will have been reduced to 10 to 14 days by the end of FY-66 or earlier.

In summary, in a period of approximately 2 years (March '64-March '66) it is anticipated that our computer will have displaced at least 20 man-years. By the close of FY-67 it is possible that this figure may rise to 24-26 man-years. It is not yet clear what the dimensions are of potential savings remaining to be realized through ADP in other areas, e.g., broadcast, public safety, land mobile, and industrial uses. But we are hard at work on this problem and hope to report to you next year on the achievement of net reductions in both staff and backlogs in these and other application processing groups through these computer procedures. Simplification of application forms and procedures has been another area of Commission concern. We are continuing to simplify forms whenever this proves possible and is consistent with the Commission's regulatory responsibilities. This process has brought benefits both to the public and the Commission, and together with the capabilities of the ADP equipment is making speed of service a much more meaningful concept.

We should add parenthetically that the size of our ADP group has virtually stabilized, and that with few, if any, additions to that staff in the next few years, we should be able to achieve both improved service and net manpower savings in the Commission.

We understand, as do you, that certain kinds of workload data can be misleading, particularly in an agency such as this where large numbers of reasonably routine applications are received. Notwithstanding, and even recognizing this factor, the sheer volume of this Commission's workload continues to be impressive. The demand, for example, for new and major changes in all broadcast servicesAM, FM and TV-continues to grow remarkably, and sometimes unpredictably. Last year in reporting to you we expressed the hope that our recent revision of AM radio standards-that is, the creation of "go-no-go" license allocation criteria-would have the effect of reducing the number of applications received, and the accompanying application-by-application processing. Our experience since then has not realized this hope of a reduced AM workload. The number of applications filed was double the figure of 220 we had first anticipated. We have found that applicants in fact are spending more money to obtain better and more complex engineering data to comply with our more stringent requirements. The obvious consequence from our point of view has been the need to allocate some additional personnel to handle more complex applications and reduce backlog in AM license processings.

Our discussion of improvements in operating efficiency, and of progress toward deorganization, should not be allowed to obscure the fact that a prime need in this Commission is for more time to review, resolve and stay ahead of the key issues in the communications industries. These are issues to which this Commission must devote more of its time and energy.