of section 74.1107 of the Commission's rules. Outlet contends that while no franchise was required to operate in Westerly, the channel service arrangement with the telephone company is the equivalent of a franchise, and when the CATV system made a new contract with the telephone company on April 11, 1966, to add 19.8 miles of cable. in Westerly, this contract was tantamount to a "new franchise or amendment of an existing franchise after February 16, 1966, to operate or extend the operations of the CATV system in the same general area" pursuant to present section 74.1107 (d). Thus, the argument continues, operation with the facilities contemplated by that contract comes within subsection (a) and (b) of section 74.1107, and cannot be commenced without a hearing or waiver of the hearing requirement. In any event, it is urged that even if the contract is not treated as a franchise, the Commission should exercise its discretion under sections 74.1107(d) and 74.1109 to impose "conditions limiting the geographical expansion of the system" beyond the amount of cable now in operation.

9. The first argument is without merit since the channel service. arrangement was merely a construction contract and not a franchise, and no authority to operate was granted by its terms. Thus, No. 74.1107 request was necessary to extend its operation in Westerly since there was no "new franchise or amendment of an existing franchise" as contemplated by the rules. The second contention is equally invalid since the criteria set out in paragraph 149 of the Second Report, or the San Diego, or Buffalo cases (Midwest Television, Inc., F.C.C. 66-683, 4 F.C.C. 2d 612; Courier Cable Co., Inc., F.C.C. 66–377, 3 F.C.C. 2d 540), are clearly inapplicable. The population of Westerly is only 9,698, there is no potential for thousands of subscribers, and there is no extension of service into a "new geographical area" since cable will only be laid within the confines of Westerly proper.3

10. In paragraph 58 of the notice of proposed rulemaking and notice of inquiry, the Commission specified rules for systems located beyond the specified zones. Systems would be permitted to carry such distant signals as they chose so long as they refrained from "leapfrogging." Carriage of Westerly's proposed distant signals is largely consistent with the interim procedures, and the proposal will be granted.

Accordingly, It is ordered, That the provisions of section 74.1107 of the rules Are waived and that Westerly Cable, Inc. (CATV 100-40) Is authorized to operate its CATV system as proposed.

FEDERAL COMMUNICATIONS COMMISSION,
BEN F. WAPLE, Secretary.

3 Other objections filed alleged that Westerly is operating in violation of 74.1103 as to proposed noncarriage of channel 4 (NBC), Boston and is not carrying channel 30 (NBC), New Britain, Examination of contour maps on file with the Commission disclose that channel 4 is a distant rather than local signal, and therefore not entitled to carriage. As to channel 30, Westerly Cable alleges, and channel 30 has not denied, that channel 30 has not requested carriage. Since the rule only becomes operative upon request, there is clearly no violation. Additionally, it has been alleged that Westerly Cable commenced carriage of the distant signal of channel 9 (independent). New York, subsequent to the Feb. 15. 1966, grandfathering date, and in violation of sec. 74.1107. Westerly Cable states, supported by detailed affidavits, that carriage of the signal began in late January 1966, that some difficulties in retransmission were encountered in the early operational stages and, on occasion, the signal was deleted when it was below acceptable quality, but was reinstated when the signal's reliability was stabilized. In the circumstances, we believe that Westerly has clearly refuted the unsupported second-hand allegation as to the date when carriage of channel 9 began.

U.S. GOVERNMENT PRINTING OFFICE: 1969

FCC 69-790

BEFORE THE

FEDERAL COMMUNICATIONS COMMISSION

WASHINGTON, D.C. 20554

In Re Application of

AMERICAN BROADCASTING COMPANIES, INC.

(ABC)

Docket No. 18606

For Renewal of Authority To Deliver File No. BFP-381

Network Radio and Television Pro

grams to Stations in Canada and
Mexico

MEMORANDUM OPINION AND ORDER

(Adopted July 15, 1969)

BY THE COMMISSION: CHAIRMAN HYDE DISSENTING; COMMISSIONERS BARTLEY AND JOHNSON CONCURRING IN THE RESULT; COMMISSIONER WADSWORTH ABSENT.

1. The Commission has for consideration: (a) Petition to deny the above-captioned application filed November 8, 1968, on behalf of Western Telecasters, Inc., permittee of UHF television station KCST, San Diego, Calif. (KCST); (b) petition to deny and for consolidation filed December 4, 1968, on behalf of Mission Cable TV, Inc., and Pacific Video Cable, Inc. (Mission); (c) opposition pleading filed December 13, 1968, on behalf of ABC; (d) opposition pleading filed December 16, 1968, on behalf of Radio-Television, S.A. and Bay City Television, Inc. (XETV); (e) Mission's reply brief of January 6, 1969; (f) reply brief of KCST, filed January 7, 1969; and (g) supplemental pleadings of XETV, filed January 17, 1969, and of KCST, filed January 30, 1969.

2. ABC, on October 4, 1968, filed the above-captioned application pursuant to section 325 (b) of the Communications Act of 1934, as amended.1 The petitions filed against this application relate solely to ABC's request for authority to deliver network television programs to television station XETV, Tijuana, Mexico, which station provides grade A VHF television service to the San Diego market. Such authority was initially granted to ABC, without hearing, on November 23, 1955. American Broadcasting-Paramount Theatres, Inc., 13 R.R. 177 (1955). That grant was subsequently challenged by the CBS and NBC affiliates in San Diego. The matter was designated for hearing, and eventually culminated in Commission affirmation of the initial grant. American Broadcasting-Paramount Theatres, Inc., 13 R.R. 1248 (1956). The Commission found that the public interest would best be

1 Section 325 (b) requires the issuance of a special permit to establish studios in the United States intended to feed programs to foreign broadcast stations whose signals are regularly received in the United States.

18 F.C.C. 2d

served by the wider program choice afforded by three television services, and, that absent a third television station in San Diego through which that choice could be realized, the ABC Tijuana outlet was justified. Id. at 1272. Appeal was taken to the Court of Appeals (D.C. Circuit) which set aside the grant and remanded the proceeding to the Commission, directing it to determine whether the foreign station's programing was objectionable by U.S. standards. Wrather-Alvarez Broadcasting, Inc. v. FCC, 248 F. 2d 646, 15 R.R. 2108 (1957). Upon remand, the Commission considered all aspects of XETV's programing, and again concluded that the public interest, convenience, and necessity would be served by the grant of a section 325 (b) permit to ABC. American Broadcasting-Paramount Theatres, Inc., 17 R.R. 69 (1958). ABC has applied for renewals of the permit every year since 1958, and these have been granted routinely by the Chief, Broadcast Bureau, pursuant to authority delegated in section 0.281 (d)(5) of

the rules.

3. San Diego is the 50th television market in the United States. In addition to ABC-affiliated XETV (channel 6), the area is currently served by KFMB-TV, channel 8 (CBS), KOGO-TV, channel 10 (NBC), KEBS-TV, channel 15 (noncommercial educational) and KCST, channel 39 (independent). A construction permit is outstanding for another independent commercial station, KJOG-TV on channel 51. No other television channels are allocated to San Diego. 4. KCST is thus the only commercial UHF station presently operating in San Diego.2 In its petition to deny, KCST alleges that it cannot compete with the three operating network affiliated VHF stations (KFMB-TV (CBS), KOGO-TV (NBC), and XETV (ABC)); that it sustained a loss of approximately $650,000 last year: that the local programing of XETV is blatantly defective; that ABC was initially permitted to deliver its programs to XETV only because a third television station was not then available in San Diego; that KCST is ready, able, and desirous of an ABC affiliation; and that the continued affiliation of ABC with XETV is not in the public interest. Mission Cable TV, Inc., and Pacific Video Cable, Inc. (Mission), in their petition to deny and for consolidation, allege that they hold franchises for CATV systems in the San Diego area; that they carry the programs of San Diego and Los Angeles television stations to about 33,000 San Diego subscribers; that in Midwest Television, Inc.. et al., 13 F.C.C. 2d 478 (1968), the Commission placed restrictions (with respect to the carriage of Los Angeles signals) on CATV expansion, so as to foster UHF development in the San Diego area: and that denial of the above-captioned application might compel ABC to affiliate with KCST, in which event the Commission could be persuaded to eliminate or modify the present CATV restrictions. In the alternative, Mission asks that the instant application be consolidated in hearing with the application (file No. BRCT-82) for renewal of license of Station KFMB-TV (CBS), so as to pursue and

2 Ownership of television station KAAR was transferred to Bass Brothers and the call letters changed to KCST on Dec. 5, 1967. On Dec. 6, 1967, the Commission granted consent to an assignment of the permit from Bass Brothers to Western Telecasters, Inc., a wholly owned subsidiary of Bass Brothers. KCST was granted program test authority on Jan. 19, 1968.

develop ways and means of assuring and accelerating the growth and development of UHF in San Diego.3

5. In its opposition pleading, ABC asserts that denial of the instant application would not necessarily result in ABC's affiliation with KCST, in that ABC might seek secondary affiliations with the two VHF network affiliates; that such secondary affiliations or a primary affiliation with KCST would significantly aggravate ABC's competítive disadvantages vis-a-vis CBS and NBC both regionally and nationally; that XETV currently delivers a lesser audience than either the CBS or NBC affiliates; that an American Research Bureau (ARB) study found that XETV provides coverage to 86 percent of the television homes in San Diego County as compared to a 63-percent coverage for KCST; that a KCST-ABC affiliation would substantially raise the current percentage of homes not capable of receiving ABČ network programs; and that a transfer of the ABC affiliation to KCST would result in an estimated annual loss to ABC in excess of $1 million.

4

6. KCST replies that its grade A and B contours encompass substantially greater areas than those of XETV; that the 63-percent KCST coverage figure is based upon the percentage of homes with all-channel receiver sets; that a KCST-ABC affiliation would accelerate the set conversion rate and attract advertisers to KCST; that since a UHF station (i.e. KCST) is now available for an ABC affiliation, the public interest no longer requires an extension of ABC's authority to deliver network programs via XETV; and that the denial of the instant application would enhance UHF development in San Diego.

7. In addition, KCST alleges that XETV's local programing is substandard when judged against the requirements imposed on U.S. stations. On the other hand, XETV maintains that the Court in Wrather-Alvarez, Inc. v. FCC, supra, merely instructed the Commission to determine whether XETV's local programs were objectionable by U.S. standards, and that the programing requirements applicable to comparative proceedings are not necessarily relevant to a section 325 (b) permit determination; that XETV does, in fact, originate nonnetwork public service programing; and that it voluntarily complies with Commission policies and rules, including sponsorship identification, equal opportunity for political candidates, and the Fairness Doctrine.

5

8. KCST has alleged that the competitive situation in San Diego renders impossible the successful operation of its UHF facility, and that it would thus incur direct and substantial economic injury from a

a By Commission action of May 14, 1969, a petition to deny filed by Mission against the application for renewal of license of television station KFMB-TV was dismissed for lack of standing and renewal of KFMB-TV's license was granted to Dec. 1, 1971.

The percentage of television homes in San Diego County presently receiving ABC network programs is 93 percent (86 percent coverage provided by XETV and 7 percent coverage provided by KABC-TV, Los Angeles). If ABC were to affiliate with KCST, the combined coverage through KCST and KABC-TV would, according to the ARB study, be significantly

less.

5XETV has submitted program data to support its contention that it originates local live public service programing and programs of interest to Mexican nationals within its service contours. KCST replies that most of these programs have not been aired within the past few years and that XETV currently broadcasts pitifully few programs of interest either to the Tijuana or San Diego communities.

renewal of the Mexican portion of the ABC application. We_view these allegations as sufficient to confer standing. FCC v. Sanders Bros., 309 U.S. 470 (1940); NBC v. FCC, 132 F. 2d 545 (1942). Where direct competition exists between broadcast interests, allegations of competitive economic injury resulting from the grant of an application for renewal of license of one station confers standing as a party in interest on the other. WBBF, Inc., 10 R.R. 1032 (1954); see also, Richland, Inc., 13 R.R. 113 (1955). Since KCST's petition, in addition to alleging private economic injury, poses questions of serious import as regards the public interest, we find it necessary to designate the Mexican portion of ABC's proposal for hearing.

9. Unlike the situation confronting KCST, Mission has failed to show how the grant of ABC's renewal application would result in direct or substantial economic injury. Whatever our action on ABC's application, the CATV policies governing the San Diego market would remain the same (see Second Report and Order, 2 F.C.C. 2d 725 (1966); Memorandum Opinion and Order on Reconsideration, 6 F.C.C. 2d 309 (1967); Dec. 13, 1968, Notice of Proposed Rulemaking, 15 F.C.C. 2d 417 (1968)). Under these policies, San Diego, being the 50th market, with UHF assignments, would not be regarded as appropriate for continued, even more widespread CATV penetration with distant or Los Angeles signals.

10. Concerning XETV's programing, the Court in Wrather-Alvarez, Inc. v. FCC, supra, observed that a foreign station is not bound by the laws and regulations of the United States. Obviously, we have no regulatory authority over XETV, whose programing, as relates to the needs and interests of the citizens of Mexico, is exclusively under Mexican jurisdiction. However, in the context of section 325 (b) of the Act, we are required to determine the degree to which XETV's locally originated programing serves the needs and interests of persons residing within areas of the United States reached by XETV's signal.

11. As previously noted, our 1956 decision in this matter turned in large measure on the fact that there was no third television outlet in San Diego for the distribution of ABC's network programing. Since this essential fact was altered when KCST commenced operation in 1968, it is necessary, in light of KCST's current objections, that the matter be reexamined in the hearing process.

12. In view of the foregoing, It is ordered, That KCST's petition to deny Is granted to the extent indicated above, and in all other respects Is denied.

13. It is further ordered, That Mission's petition to deny and for consolidation, Is dismissed.

14. It is further ordered, That the above-captioned application Is granted in part to the extent of authorizing the delivery of ABC network radio and television programs to stations operated or authorized by the government of Canada, as more fully described therein.

15. It is further ordered. That with respect to ABC's proposed delivery of programs to XETV and pursuant to section 309 (e) of the Communications Act of 1934, as amended, the above-captioned appli