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History of Communications-Electronics in the United States Navy, Captain Linwood S. Howeth, USN (Retired), 1963, pages 313-318:
Attempts to Establish a United States Government Radio Monopoly
1. BRITISH ENDEAVORS TOWARD ESTABLISHMENT OF WORLD DOMINANCE IN RADIO COMMUNICATIONS.
England, long dominant in cable communications which, with her monopoly of sea transportation, had been utilized for the expansion of the Empire's world trade, was quick to see the necessity of having her nationals in control of radio communications. Germany, refusing to accept a British monopoly, arranged for and called the first International Radio Telegraph Conference in 1903 in an endeavor to obtain international agreement for the control of the new medium of communications. This country sent delegates to this Conference who did much to further such agreement. However, our Congress took no action to prevent foreign interests from obtaining a foothold in this country. By 1912 this shortsightedness, combined with the unscrupulous methods of radio stock promoters, resulted in the survival of only one important American radio operating company, the Marconi Wireless Telegraph Co. of America, a subsidiary of British Marconi. The objections of the Marconi interests to any legislation, national or international, which would have controlled their operations have been related in the preceding chapters.
It is most probable that, except for World War I, the Marconi Co. would have continued to expand and would have become the dominating factor in world radio communications. Existing resentment against the British control of communications was intensified in this country by the wartime severing of the cables connecting the United States and Germany which forced the use of radio for the conduct of business, diplomacy, and for the reception of news from that country.
During the war the American Marconi Co. attempted to promote the belief that a substantial percentage of its stock was American owned but when the U.S. Shipping Board demanded they provide an affidavit showing that more than one-half its stock was owned by U.S. citizens, they were unable to do so.1
The war temporarily eliminated the Marconi interests from the American commercial radio business but, with an eye to the future, they made all possible efforts to obtain patent rights on all available continuous wave transmitting equipment, having become convinced that the day of the spark had passed, regardless of improvements which might be made to make its gap sing more sweetly. In 1915 the parent Marconi Co. conducted negotiations with the General Electric Co. for the purchase and exclusive use of Alexanderson alternators for their long-distance circuits. These efforts were discontinued because of wartime pressure on British foreign exchange.2 Later they attempted to purchase the arc transmitter patents of the Federal Telegraph Co.
2. ATTEMPT TO REVISE THE ACT TO REGULATE RADIO COMMUNICATIONS
On 21 November 1916, an Interdepartmental Radio Committee draft of proposed radio legislation was informally discussed at a meeting of interested commercial and Government operating interests arranged by the Department of Commerce. The provisions of this draft materially increased governmental control over that authorized by Public Law 264 of 1912. The most important changes, which are given below, were opposed by the Marconi Co., represented by their vice president and general manager, Mr. E. J. Nally, who opened his discussion with the complaint that his company had only a limited time to study the effects of the proposed legislation.3
Section 5 contained the provisos that Government stations could be opened to the general public business and that the Secretary of Commerce could fix the rates charged by commercial companies. Nally objected to both of these provisos on the grounds that, if enacted into law, the Government would be in competition with private interests and that, since their rates would not be subject to the ruling of the Secretary of Commerce, they could undercharge in an effort to eliminate private competition.
Section 6 contained the proviso that the Government, through the Navy Department, could acquire, by purchase at a reasonable valuation, any coastal radio station then in operation in the United States which the owner desired to sell. Nally stated that this indicated the Government's desire to eliminate commercial interests and that the proposed bill did not stipulate who should determine the reasonableness of the valuation of the properties.
The last paragraph of section 7 provided that no license should be granted a new station if, in the opinion of the Secretary of Commerce, it would seriously interfere with an existent Government or commercial station in the vicinity. The penultimate paragraph of section 8 sought to vest further licensing authority in the same official by permitting him to determine in advance of construction whether the installed apparatus would be licensed. The Marconi spokesman opined that this would stifle the growth of the radio art as the opinion of one person could prevent the use of a newly developed apparatus.
The first paragraph of section 9 provided that the President, at his discretion, could close stations, remove their apparatus or authorize their use as Government stations upon just compensation to its owners. Public Law 264 of 1912 authorized such action ''in time of war or public peril or disaster." In opposing this, it was stated by the Marconi Co. that it had, at previous times, voluntarily offered its complete organization to the Government for use in war or national emergency and that it could not see the necessity for extending these powers to the President in time of peace.
Section 10 permitted the officials of the Department of Commerce to inspect the records of all commercial companies. The Marconi Co. contended that this should be limited to records pertaining to the transmissions of messages and the installed equipments.
Section 11 included a requirement for the employment of licensed persons in the operation or supervision of a station. This was objected to since it necessitated the obtaining of licenses by engineers who might not necessarily be radio operators.
Public Law 264 required a logarithmic decrement not in excess of two-tenths per complete oscillation except when transmitting distress messages. Section 17 of the proposed legislation provided that the Secretary of Commerce could specify the decrement. The Marconi official believed this would give ground for controversies since it was not, at that time, possible to determine in advance what the actual decrement of a new station would be.
The Marconi Co. contended that the requirements of section 20 which prohibited commercial use of frequencies between 75 and 1,500; section 21 which restricted the number of frequencies allowed for commercial ship-shore communications; and section 23, which further limited the number of shore stations which could be licensed and prevented changing equipment in existent ones, manifestly favored Government operation at the expense of the commercial companies. Nally considered that the drafters of the proposed bill were attempting to solve the interference problem by limiting the numbers of stations and restricting the use of frequencies instead of conducting research to remove the causes.
He closed his denouncement by stating:
In general the proposed bill is evidence of a desire to limit private enterprise, and tends to discourage and suppress individual efforts to promote or advance the radio signaling art. For the reasons stated as well as for other technical considerations, the Marconi Company desires to record its protest against the provisions of the bill under consideration.4
Prof. Arthur E. Kennelly, of Harvard, president of the Institute of Radio Engineers, submitted a communication which was read by Mr. David Sarnoff, the institute's representative. He said that he was mainly interested "in the active development of the science and art of radio communication in America as a scientist, a teacher, an operator, a telegraphist and a United States citizen." Continuing his remarks he stated, in substance, that since it was the Government's duty to protect American enterprise and capital the Congress should oppose any legislation regulating the industry since such regulation in peacetime could degenerate into the confiscation of private property or might force existing companies from the business. He further contended that regulation could retard incentive and development as it had done to the Government-owned systems of several European countries.5
Similar protests were voiced by Prof. Alfred N. Goldsmith of the College of the City of New York and Sarnoff, himself.6
The attitude of the commercial interests toward what they considered an attempt to eliminate them from the business was reported in the Wireless Age of January 1917:
The general trend of the discussion disclosed the feeling that in this bill was evident a distinct spirit of hostility towards existing wireless organizations. Criticism was leveled at the proposal to confer power upon government departments to compete with commercial stations operated by American citizens, and at the same time dictate the terms of regulation. It was asserted that the quickest way to stifle inventive effort would be to permit government competition or confiscation to destroy the market for private enterprise; furthermore that this was an unpatriotic action, since it is perfectly obvious that encouragement and aid should be given to promote invention in the art, so that the United States should have the best obtainable system in time of need.
Proposals to restrict the operation of commercial stations in time of peace and to impose handicaps which would prohibit operation of these stations were unanimously opposed by all representatives at the meeting.
3. FROM REGULATION TO ATTEMPTED GOVERNMENT MONOPOLY
Despite the strenuous objections of the Marconi interests and the leading radio engineers of the country, the proposed legislation, virtually unchanged, was transmitted to the House of Representatives. It was introduced by Congressman Joshua W. Alexander of Missouri, chairman of the Committee on the Merchant Marine and Fisheries, and became House Resolution 19350, commonly known as the Alexander bill.
Secretary of the Navy Daniels, in a letter dated 26 December 1916, announced the Government's position, stating that the Alexander bill was aimed at the elimination of commercial interests from the ship-shore radio communication business. He further recommended that Congress provide for the purchase of all existing commercial stations in the United States, Alaska, Hawaii, Puerto Rico, and Swan Island within 2 years and that no additional stations be licensed for commercial operation. He based his actions upon the necessity of eliminating interferences, duplications of efforts, and unsatisfactory radio discipline, and closed his letter by stating that radio stations must be in Government hands before the first hint of possible hostilities.7
Open hearings on the bill commenced before the Alexander Committee on 11 January 1917 with the presentations of its proponents. These were followed one week later by those of the opposition, led by the Marconi Co., assisted by numerous radio engineers and by all the amateur associations except the American Radio Relay League. The latter, headed by Mr. Hiram Percy Maxim, vigorously supported the measure much to the surprise of the other amateur organizations. Spirited debate occurred over the provisions of the bill that would have limited the percentage of the stock of any operating commercial company which might be alien-owned and the prohibition of against alien officers of such companies. At the Department of Commerce hearings, Nally had ignored this proviso because he did not care to divulge the percentage of foreign-owned American Marconi stock. The Marconi interests again marshalled their full strength in denouncing the provision which would permit Government radio stations to handle commercial traffic.8
Prior to the completion of the hearings, diplomatic relations with Germany were severed, Government officials became deeply engrossed in other business, and the bill was not reported out of committee. On 7 April the Navy assumed operational control of all radio stations, thus removing the immediate need for action. Nevertheless, Secretary Daniels constantly endeavored to obtain the congressional approval he desired.
The actions of the Marconi officials further convinced Government officials that England was intent upon establishing her dominance in this field when the war should end. They were equally convinced that it was necessary to eliminate British influence from American commercial radio operations and further, if possible, to establish Government monopoly and American dominance in the field. With this in mind, and using wartime necessity as a reason, they proceeded to purchase the Federal Telegraph Co. stations and to convince the Shipping Board of the necessity of purchasing the installations on all seagoing vessels of American registry. This transaction was consummated by the Navy's additional purchase of the American Marconi coastal shore stations. Even with Government ownership of practically all the coastal radio stations, congressional approval of the Alexander bill was necessary to prevent the Marconi Co. from building new stations and leasing shipboard equipment once the Government was divested of its wartime authority. However, Daniels believed in the old adage, "possession is nine-tenths of the law."
4. FAILURE TO ESTABLISH THE MONOPOLY
Following the Armistice the Secretary was successful in reviving hearings on the Alexander bill. These commenced before the House Merchant Marine Committee on 12 December 1918. Daniels stated the Navy's position and followed with a description of the Navy system built up during the war.
His closing statement commended the Navy on its foresightedness in purchasing the Federal and Marconi Co.'s stations, and pleaded for enactment of legislation which would permit the Navy to perpetuate its control. Upon the close of his argument there was heated discussion over these purchases. Congressman Edmonds of Pennsylvania rebuked him severely stating that:
After this committee refused to bring out a bill to purchase wireless apparatus, you utilized the government's money to purchase this wireless apparatus and took over the commercial systems without the consent of Congress.
He continued, stating that this action had embarked the Nation on a project that should have had congressional approval and accused him of forcing a monopoly of radio communications upon the Government.
Todd, Director of Naval Communications, introduced an amendment to the bill which was calculated to appease the amateurs, and to a large extent did so.
The Marconi Co., aided by the National Wireless Association which had organized powerful support, continued to lead the opposition without change in their line of attack. They were abetted by the midterm congressional elections of 1918 which resulted in a reversal of control of both the Senate and the House. With the Republicans, advocates of private industry, in control, thoughts of Government ownership were but little short of utopian. So vigorous was the opposition that on 16 January 1919 the committee unanimously tabled the bill. It was never reconsidered. Following this action Navy officials, excepting Daniels, shifted their support to further the formation of a strong, American-controlled commercial company.
The Secretary, unwilling to admit defeat, addressed two letters to the President of the U.S. Senate and the Speaker of the House of Representatives. The first one, dated 19 July 1919, transmitted the text of a proposed bill which would authorize the use of radio stations under the control of the Navy Department for commercial purposes.9 The second letter, dated 24 July 1919, transmitted the recommendation that Congress immediately enact legislation regarding radio communications along the following lines:
Either by a committee of Congress or by special designated commission, authorize a comprehensive study of the problems in connection with radio within the United States.
No action was taken on the second letter. Unswerving to the end of his tenure in office, Daniels' final annual report, which was for fiscal year 1920, stated that the Government should have exclusive control of radio or else make it a monopoly in private hands.
Authorize the President to set aside from time to time, by proclamation, certain bands of wave lengths for ship-to-shore work, for shore and aircraft, and for transoceanic service, in accordance with international conventions and demonstrated needs.
Constitute ship-to-shore radio service a government monopoly under the Navy.
Constitute transoceanic and International radio service a government monopoly under the Navy.
Authorize the Navy Department to utilize immediately all Navy radio stations for commercial and press business.
Authorize the Navy and other departments to assist American enterprise in the sale of radio apparatus and the development of American owned radio stations abroad, and especially to authorize the Secretary of the Navy to authorize the use by American companies, under proper conditions, of government-owned patents and improvements, to be paid for either in exchange of patent rights or other suitable ways.10
The November 1919 issue of the Wireless Age contains an excellent editorial on the radio situation. In substance, this stated that while Secretary Daniels had not abandoned hope of persuading Congress to pass the Alexander bill it was not likely that Congress would yield to any proposal leaning toward Government ownership of this method of communication. It continued, stating that a compromise had been suggested looking to the establishment of an American-controlled company, operating under a Government-authorized monopoly, but that there would be no commitment on the part of the Government until Daniels could be convinced that the legislation desired by the Navy Department could not be obtained. It ended the discussion stating that the solution to the problem appeared to be through private interests under Government control.
5. ENABLING LEGISLATION
The President, on 11 July 1919, approved the return of the radio stations to their owners on 1 March 1920. Since the Government owned most of the coastal stations, legislation was required to permit the use of these stations for commercial purposes at locations where proper facilities were not provided or until such a time as they could be provided by private interests. Pursuant to the request of the Secretary, dated 19 July 1919, Congress, by Public Resolution, approved 5 June 1920, authorized the use of naval radio stations for a period of 2 years for the transmission and reception of private commercial messages at locations which lacked adequate commercial facilities. This was extended until 30 June 1925 by another Public Resolution approved 14 April 1922. Still further extension until 30 June 1927 was granted by Public Resolution approved 28 February 1925. Prior to the expiration of the last extension, the authority was made permanent by the enactment of Public Law 632, an act for the regulation of radio communications and for other purposes, approved 23 February 1927.
1 The Radio Industry, 1923 Federal Trade Commission hearings (Washington, Government Printing Office, 1923), Testimony of Mr. Lewis MacConnich, p. 885.
2 W. Rupert Maclaurin, "Invention and Innovation in the Radio Industry" (the Macmillan Co., New York, 1949), p. 100.
3 "The New Radio Legislation," The Wireless Age (Marconi Wireless Telegraph Co. of America), January 1917.
7 "Government Control of Wireless," the Wireless Age, op. cit., February 1917.
9 Annual Report of the Secretary of the Navy, 1919 (Washington, Government Printing Office, 1919), p. 96.
10 Annual Report of the Secretary of the Navy, 1919, Ibid., pp. 407-412.
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