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University Microfilms 300 North Zeeb Road Ann Arbor, Michigan 46106 A Xerox Education Company SCHUBERT, Gregory Kent, 1940- THE PROPOSED MERGER OF THE AMERICAN BROADCASTING COMPANY AND THE INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION. The Ohio State University, Ph.D., 1972 Speech University Microfilms, A XEROX Company, Ann Arbor, Michigan ©Copyright by Gregory Kent Schubert 1972 THE PROPOSED MERGER OF THE AMERICAN BROADCASTING COMPANY AND THE INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of the Ohio State University By Gregory Kent Schubert, A,B., M.A. ****** The Ohio State University 1972 Approved by Department of Speech Communications PLEASE NOTE: Some pages may have indistinct print. Filmed as received. University Microfilms, A Xerox Education Company PREFACE The conglomerate and large corporations have had a long and varied association with the broadcasting industry. Westinghouse and General Electric, two giant manufacturing organizations, have been associated with broadcasting, in a sense, since its historical beginnings. Due in part to their manufacturing interest in broadcast equipment, this relation­ ship in the early years was encouraged as the actual air signal was viewed as a test vehicle for technological experimentation in the areas of transmission and reception. The Radio Corporation of America, as its name implies, was also quick to enter broadcasting and by the early 19^0 's had not only achieved a reputation in the areas of techno­ logical experimentation and design of equipment, but one in the field of station ownership and network broadcasting as well. It was these developments which prompted the first government action in the area of major corporate control of broadcasting interests. In 19^3, the United States Govern­ ment ordered the Radio Corporation of America to divest it­ self of one of its two broadcast networks, arguing that it had a virtual monopoly in the field of broadcasting.1 This was a result of a four year, comprehensive study of network broadcasting practices and activities in the i i United States which had been undertaken by the Federal Communications Commission. This study led to the issuance of the Commission's report on "Chain Broadcasting" and the 2 adoption of the network regulations. Of its dual operations, NBC selected to sell its "blue" network to oandy manufacturer Edward Noble who sub­ sequently changed its name to the American Broadcasting 3 Company. Some twenty-two years later the American Broadcasting Corporation was again to become involvedr in connection with a major corporation in manufacturing and communications, in actions before the Federal Communications Commission and the Federal Courts, But this time, acquisition, not divestiture, was the major issue— the proposed merger of the American Broadcasting Corporation with the International Telephone and Telegraph Corporation, Among the contested issues were the protection of pro­ gramming autonomy from corporate control, effects of foreign interests, and the anti-competitive possibilities posed by the merger. The consideration of the proposed merger invol­ ved two FCC hearings, pressure from Congress, and a suit filed by the Justice Department. It was the largest single proposed transfer of licenses in the Commission's history. The purpose of this study is twofold* first, to pro­ vide historical documentation of the events surrounding the merger and, secondly, to develop the issues that arose iii in the discussion of the merger as they pertain to conglo­ merate and large corporate broadcast activities. Descriptive in nature, the study drew heavily upon The voluminous filings of the applicants available to this writer in the Washington offices of the Federal Communica­ tions Commission. The complete public record, F.C.C. Docket #16828, contains, in its fourty-plus volumes, all public correspondence, transcripts of hearings and con­ ferences, and exhibits pertinent to the merger considera­ tions, This resource material representing over 27,500 pages of relevant information, was invaluable in compiling the factual documentation necessary to prepare a full account of the sequence of events in the ABC-ITT case. In addition this writer drew heavily on the trade publications, especially Broadcasting magazine for secondary materials and comment. The latter publication was espe­ cially helpful as recording industry response to the deliberations. I would like to acknowledge the assistance and encour­ agement provided by my advisor, Dr. Walter Emery, during the preparation and writing'of this study, Additional thanks are directed to Dr. Franklin Knower and Dr. Robert J. Wagner who offered their time and penetrating questions in assisting this writer m consolidating the materials for i v this study. Next, my deep appreciation to Dr, Duane E. Tucker for his encouragement and support and to my late parents, Mr, and Mrs, Frederick 0, Schubert, for their love and faith in me. And finally to my wife, Lynn, and my daughter, Kelly, who were the real motivating factors in my decision to undertake the challenge presented by this study, and who displayed great forebearance in deal­ ing with the occasional personality changes I developed during the preparation of this work. v FOOTNOTES PREFACE ^NBC vs U.S. 316, U.S. 4^7. • 2 FCC Report on Chain Broadcasting, Commission Order No, 37, FCC DocKet No. 5060, May, 19^1, p. 35. •^Sidney Head, Broadcasting in America. (Boston* Houghton Mifflin Company, 195^)," pT^l^l. v i VITA June 10, 1940 Born - Chicago, Illinois 1963 B.A., Miami University Oxford, Ohio 1963-1964 Graduate Assistant, WMUB-TV-FM Miami University, Oxford, Ohio 1964 M.A., Miami University Oxford, Ohio 1964-1966 Producer-Director, WBGU-TV, Bowling Green State University Bowling Green, Ohio 1966-1968 Ooerations/Production Manager, WBGU-TV, Bowling Green, Ohio 1968-1972 General Manager/program Director, WBGU-TV, Bowling Green, Ohio PUBLICATIONS Wrote, Produced, Directed "Show Me," a one-half hour film on teaching motor locomotion skills to retarded children. Script writer for "Children of the Seasons I and II," two one-half hour color documentaries on State supported instructional programs for children of seasonal workers in Ohio, "Broadcasting Unionsi Structure and Impact," Broadcasting and Bargaining, Co-Author, Dr. Allen E. Koenig, University of Wisconsin Press, 1970. FIELDS OF STUDY Major Field 1 Radio and Television Communications Studies in Broadcast History, Professor James E. Lynch Studies in Communications Theory,. Professor Franklin H. Knower Studies in communications Research, Professor Robert R. Monaghan Studies in Motion Pictures, Professor Donald R, Staples v• m• « TABLE OF CONTENTS Page « * PREFACE 11 vii INTRODUCTION A 'Needy' ABC, Inc.? Plan Ahead Chapter I. THE COMMISSION BEGINS CONSIDERATION OF THE MERGER ........................... 9 The Interim The Man at the Topi Harold Geneen , The Oral Hearings Congress Intervenes Additional Problems of ABC ITT Responds The Congressional Flaclc Continues Justice Department Responds Reaction by ITT and ABC II. THE MERGER IS A P P R O V E D ..................... 79 The Dissent of Commissioner Nicholas Johnson Aftermath of the First Decision Congress Reacts to FCC Approval The Justice Department Intervenes The Commission Responds to the Justice Petition The Commission Considers the Justice Request III. THE FORMAL HEARINGS AND COMMISSION OPINION . 1^9 The April 19^7 Hearing Charges of Tampering Leveled at ITT-ABC The Parties File Post Hearing "Findings" Page The Broadcast Bureau Findings The Final Oral Hearing The Commission Reaffirms