It will be seen that Section 2 (b) (2) exempts from the jurisdiction of the Commission, except as to Sections 201-205, inclusive, carriers engaged in interstate or foreign communication solely through physical connection with the facilities of another carrier not directly or indirectly controlling or controlled by, or under direct or indirect common control with such carrier.

The Commission having heard and having considered all facts and matters presented for and on behalf of telephone carriers, and having read and having considered the law, and being fully advised, finds and holds that:

1. Every wire telephone carrier owning, maintaining, or operating a toll line which crosses a state or national boundary is subject to all the provisions of the Communications Act of 1934.

2. A wire telephone carrier which neither demands nor receives any charge, compensation, or commission on interstate communication or service is not subject to the Act.

3. Every wire telephone carrier with one or more exchanges, or one or more toll lines within a single state, participating in interstate communication by physical connection with another wire telephone carrier within the same state, is subject to Sections 201 to 205 only of the Act, except when the matter of control referred to in Section 2 (b) (2) of the Act is involved.

4. The phrase "directly or indirectly controlling or controlled by, or under direct or indirect common control with" as used in Section 2 (b) (2) of the Act contemplates a mixed question of fact and law to be determined in each case heard and considered by the Commission.

3 F. C. C.

BROADCAST DIVISION, Commissioners Sykes, Chairman, Case, and Prall. On October 17, 1934, the World Broadcasting System, Inc., filed a petition for an amendment to or clarification of paragraph 176 of the Rules and Regulations of the Commission. There was also filed by the American Federation of Musicians, a memorandum in opposition thereto requesting an opportunity to be heard orally.

This Rule is as follows:

A mechanical reproduction shall be announced as such except when its use is merely incidental, as for identification or background. The exact form of announcement is not prescribed but the language shall be clear and in terms commonly used and understood. The following are examples of statements sufficient for the purpose:

a. "This as a phonograph record."

b. "This is a player-piano record."

In all cases where electrical transcriptions made exclusively for broadcast purposes are so constructed as to record a single continuous program upon more than one mechanical reproduction, rather than a recordation of the entire program upon a single mechanical reproduction, the announcement required hereby shall be made at the commencement of each such program and in no event less than every 15 minutes. All other announcements required hereby shall immediately precede the use of each separate mechanical reproduction.

On April 16, 1935, the Commission designated the petition for the hearing of oral argument June 20, 1935, and on April 19, 1935, gave public notice thereof to all interested parties. The notice stated the time and place of hearing and that all parties who wished to participate should file notice of desire to be heard before the Commission not later than May 18, 1935.

In accordance with the notice, the Commission heard oral argument on the petition of the World Broadcasting System, Inc., on June 20, 1935, at which time 28 parties appeared before the Broadcast Division and participated.

The argument was opened by counsel for the petitioner who stated that in interpreting the existing regulation there were two possible objectives which the Commission should have in mind; first, to prevent any fraud upon the public as to the nature of the programs being given; and second, to minimize the regulatory effect involved in preventing that fraud, and to keep at a minimum supervision over text of programs or details thereof.

Neither the World Broadcasting System, Inc., nor the American Federation of Musicians are licensees, but the former provides a program service for a great many licensees against whom the regulation in question operates. This program service is by means of a "transcription" which is a mechanical reproduction of some performance placed upon a disc or other device, making the same available to a radio broadcast station. Another kind of mechanical reproduction is the phonograph record. The rule in question relates to both of these. The transcription service rendered by the World Broadcasting System, Inc., is exclusively for broadcast stations, and cannot be used on the ordinary phonograph.

The particular instance in which petitioner requests a clarification of Rule 176 refers to the second paragraph relating to transcriptions made exclusively for broadcast purposes. The Commission has interpreted this provision as requiring the announcement of transcriptions containing one minute announcements, sometimes known as "spot announcements," where they are a part of the main program and not incidental as for identification or background.

With respect to discs which have three or four unrelated individual selections recorded on each side, the Commission has interpreted Rule 176 to require each of these selections to be announced in advance of rendition as mechanical reproductions for the reason that they are not "a continuous program." The selections are so arranged on the disc that short announcements may be made between the playing of individual selections, thus breaking a "continuous program." Manifestly, the selections being unrelated the announcement might be made before each without spoiling the continuity of the program.

The existing Rule primarily supports the interpretation given it in the past by the Commission.

The Commission has received wholesale complaints from licensees against this Rule as thus interpreted on the ground that the listening public objects to the constant and repeated announcements that

programs being transmitted are "transcriptions" or "recordings. Licensees urge that the Rule be revised so as to permit the broadcast of one minute or less announcements by mechanical reproductions without any mention whatsoever of the fact, and that public interest will be served by changing the rule to permit the same.

It was the contention of counsel for the Petitioner that transcription service was no more a misconception than were network programs because each used a mechanical device for getting the program to the listening public; one using a wire medium, the other using a disc.

It appears from this record without contradiction that mechanical reproductions are a necessary established service and of value to the programs of a broadcast station. It also appears that for economic reasons the smaller stations find it necessary to use transcription service and phonograph records because live talent is not always available to them, and in many cases where live talent is available the continuous use of it is quite costly. Under the existing rule, the use of mechanical reproductions is widespread and has existed for some length of time; a modification so as to require less frequent announcements would not necessarily increase the use of mechanical reproductions. In clarifying or modifying the rule it would seem necessary to make a clear statement of requirements to make possible the conveyance to the listener by the station of such information that the listener will know the origin of the program, will not be deceived, and at the same time not tired by too frequent announcements. It is believed that the rule herein announced will accomplish such purposes.

There is no doubt but that the listener's interest is enhanced by the knowledge that the artist is performing simultaneously with the reception in the home. Likewise it is most important to guarantee the continuance of such appearances both from the standpoint of the public and from the viewpoint of continuing the gainful employment of the artists who have contributed so much to the art of broadcasting. Indeed radio broadcasting would lose much of its appeal to the public if the rendition of live talent programs is in any way curbed.

A resolution was presented from the National Association of Broadcasters, in which it is alleged that the use of the transcription method of broadcasting programs is generally accepted by the stations and listeners and has become an important economic factor in the operation of broadcasting stations; that the existing requirements of the rule result in loss of income to stations; that the broadcasting industry would be greatly benefited by the removal of existing restrictions. The National Association of Broadcasters urges the Commission to alter the existing regulations.

It is a well-established principle of administrative law that primarily an administrative ruling must be reasonable. While the Commission considers the economic situation of the broadcasting industry of the country as an element of reasonableness in promulgating its regulations, nevertheless, the fact that stations experience a loss of income cannot be determinative of public interest where the regulation is designed, as is Rule 176, to protect the public from deception. From the record before the Commission, it is of the opinion and finds:

(1) That some regulation in the nature of the existing Rule 176 is necessary to protect the listening public from deception and the artists and producers from unreasonable injury;

(2) That at the same time, the economic situation from the stations' standpoint (which involves the furnishing of a free service to the public) must be recognized;

(3) That in all cases, save a few as specifically set out in the rule as amended, the use of mechanical reproductions of any duration should be announced in accordance with reasonable standards;

(4) That requirements for the announcement of mechanical reproductions are necessary and in the public interest; and

(5) That public interest, convenience, and necessity will be served by a clarification or amendment of Rule 176 as follows:

176. Each broadcast program consisting of a mechanical reproduction, or a series of mechanical reproductions, shall be announced in the manner and to the extent set out below:

1. A mechanical reproduction, or a series thereof, of longer duration than fifteen minutes, shall be identified by appropriate announcement at the beginning of the program, at each fifteen minute interval, and at the conclusion of the program; provided, however, that the identifying announcement at each fifteen minute interval is waived in case of a mechanical reproduction consisting of a single, continuous, uninterrupted speech, play, symphony concert, or operatic production of longer duration than fifteen minutes;

2. A mechanical reproduction, or a series thereof, of a longer duration than five minutes and not in excess of fifteen minutes, shall be identified by an appropriate announcement at the beginning and end of the program;

3. A single mechanical reproduction of a duration not in excess of five minutes, shall be identified by appropriate announcement immediately preceding the use thereof;

4. In case a mechanical reproduction is used for background music, sound effects, station identification, program identification (theme music of short duration), or identification of the sponsorship of the program proper, no announcement of the mechanical reproduction is required;

5. The exact form of the identifying announcement is not prescribed but the language shall be clear and in terms commonly used and understood by the listening public. The use of the applicable identifying words such as "a record," "a recording," "a recorded program," "a mechanical reproduction," "a transcription,” “an electrical transcription" will be considered sufficient to meet the