The Voice of ITT

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POLITICS JULY 8, 1967

The Voice of ITT

The Federal Communications Commission has, for the second time, approved the acquisition of the American Broadcasting Company by International Telephone & Telegraph. This decision and the route by which it was reached tell less about the problems of economic competition among international companies, than about the diminishing rights of dissent and the waywardness of a free press.

Plans for the acquisition were announced in early 1966, and although this was to be the largest merger in broadcast history, raising a number of serious economic and political problems, the FCC originally scheduled only three hours of hearings. (As it turned out they ran for two days last fall.) There was no public defense mounted against the merger, no cross-examination of company witnesses, no request by the commission for books and records of the two firms. Officers of the two companies were taken at their word. On December 21, the commission by a 4-3 vote approved joining the companies.

The Justice Department's antitrust division then asked that hearings be reopened, a request the commission grudgingly granted. The FCC refused to allow the American Civil Liberties Union to testify as a public defender, claiming it would serve no useful purpose. On April 10 an examiner began a second series of hearings which ran three weeks, the full commission heard arguments for two days, and as expected the FCC, on June 22, by the same 4-3 margin again approved the merger. Voting in favor were Lee Loevinger, who wrote most of the majority opinion, Robert E. Lee, James J. Wadsworth and Rosel H. Hyde, the chairman. Hyde was the swing vote. Against were Nicholas Johnson, who wrote most of the dissent, Robert Bartley and Kenneth Cox. The Justice Department has 30 days to file an appeal in the courts. Some members of Congress show some interest in holding hearings, although at this writing the prospect is uncertain. For the most part, congressmen who have said they are concerned about economic concentration and freedom of the press have sat on their hands.

In developing its case against the merger, the Justice Department’s chief lawyer, Lionel Kestenbaum, put on a brilliant show. Under his questioning ITT witnesses indicated that had ITT not bought ABC, it might well have picked up other broadcasting companies, eventually creating a fourth network and thus creating more competition. In addition, ITT officials said the company was seriously interested in cable television before ABC came along. (Cable TV would greatly increase the number of television channels by transmitting via telephone wires rather than over airways). Now, ITT has dropped cable television. Most serious, however, was the suggestion that the merger may set back communications technology. Experts said ITT was advanced in this area, and that the day was approaching when a television set could pick up signals directly from a satellite, instead of receiving them from a relay tower which is the current practice. But with ABC’s heavy investment in relay towers, why should ITT want to push forward with technology that would render the tower system obsolete?

While such issues are interesting to antitrust lawyers, the main question in this case is the probable effect of the merger on the independence of ABC, what there is of it. Should the government allow ITT to pick up a public network and run the risk of having it become the voice of ITT’s national and international operations?

ITT is the ninth largest industrial corporation in the world and gets 60 percent of its income from 40 different countries. In addition to sales of communications equipment, ITT operates subsidiaries in life insurance, finance, car rentals, airport parking, book publishing, education technology and a variety of other enterprises. Abroad its telephone subsidiaries are directed, among others, by members of the British House of Lords, the French National Assembly and a former premier of Belgium. The decisions of its boards of directors are affected by the constant ebb and flow of international politics. This is not another large American company operating in what is thought to be a regulated marketplace, but rather a kind of supra-governmental organization. It does not employ lobbyists to influence policy in foreign countries, but rather sends envoys who ply a secret diplomacy.

In 1954, for instance, ITT made a deal with the Air Force to run a cable from Canada to England in an operation called Deep Freeze. In both those countries, there was opposition to a foreign firm’s getting the job, and Ellery Stone, then president of Commercial Cable Co., an ITT affiliate, went off to lobby with one of his old British pals. He wired back, “Had meeting with Macmillan Minister Defense Tuesday, 20 minutes of which were devoted to briefing him on Deep Freeze. . . . Halfway thru our meeting he dictated memo to permanent Secretary of his Ministry, advising of his relationship with me during the war, my present position, the cost and route of Deep Freeze and the JCS [Joint Chiefs of Staff] support saying that he understood our application had been pending for some time before HMG [Her Majesty’s Government]. . . . He suggested that he be informed soonest where the matter stood.”

ITT’s International Diplomacy

Meanwhile, Forest Henderson, executive vice president of American Cable & Radio Corp., another ITT subsidiary, was busy working on the Canadians. He wired Stone of progress in the negotiations: “Have just had phone conversation with Martin Montreal [E. J. Martin, now and then representative of the Commercial Cable Co. for Canada.] He had just finished talking with our counsel [Gordon MacClaren, ITT special legal counsel in Canada] who had received call from [Lester] Pearson minister of external affairs Thursday p.m. who requests we keep following information completely confidential. . . . He told our counsel that NATO was now involved and that various countries within NATO were going to consider it. . . .

Martin called Bryce [Canadian cabinet secretary] . . . after receiving this information and explained situation to him outlining Pearson’s conversation to our counsel and pointing out fact that we had been promised a reply soon on our application by Canadian government. Bryce replied that he was going to consult immediately with various ministries involved and would give Martin a report Friday which Martin is going to relay to me. This report from Bryce will also be strictly confidential but it will help us to know the lay of the land and guide us in making further plans and decisions. We feel that it is high time for our State Department to step into this picture with a strong message to the PMs of all countries involved requesting immediate attention to our project and favorable action on same . . . because of following sentences and strictly confidential nature of above information we do not propose to divulge same to State Department. It is of greatest importance that above information coming from highest government source not be mentioned to anyone including military person. It is pointed out that should the above become known the consequences would be disastrous.”

Here was ITT playing off the governments of three countries to its own advantage. (It is, incidentally, illegal for ITT to have entered into such dealings with foreign officials without informing the FCC, which it did not.) Deep Freeze never came off, but it is nonetheless hard to imagine an enterprising reporter from ABC, another ITT affiliate, breaking the story that would surely damage the parent company. So as to put off people who worry lest ABC lose what independence it has, ITT last fall gravely promised to protect the freedom of the broadcasting company. A statement said, “The independence of ABC programming from any other ITT commercial or other similar interest shall be inviolate. No officer, employee, or agent of any ITT system company or group shall take any action or make any attempt to influence in any way whatsoever in the news, special events, entertainment, or other programming of the ABC network or stations for the purpose of attempting to further, or to avoid conflict with, the commercial or other interests of an ITT system company or group.”

Imbued with the spirit of this communique, Edward J. Gerrity Jr., vice president for public relations of ITT, paid a call at The New York Times Washington bureau the night of February 1 to speak with Eileen Shanahan, the reporter covering the merger story. On previous occasions ITT public relations representatives had complained to Miss Shanahan that her stories were “unfair,” and now Gerrity was trying to push on her the text of an FCC order which was particularly nasty about the Justice Department, and thus in the interest of ITT. Miss Shanahan didn't think it merited publishing in full in the Times and told Gerrity so. Gerrity gave up that line and started off in a different direction. “He asked me,” Miss Shanahan later testified, “whether I had been following what had been happening to the price of the stock. My best recollection is that he was referring to both ABC and ITT stock although I am not clear on that point. . . . I said, ‘No, I didn’t watch individual stock prices closely’. He asked me, didn’t I feel I had a responsibility to the shareholders who might lose money as a result of what I wrote.

“I said, ‘No, I didn’t. My responsibility was to find out the truth and print it.’ The conversation still continued. He then . . . asked me whether I was aware Commissioner Nicholas Johnson was working with some people in Congress on legislation that would forbid any newspaper from owning any broadcast property and what did I think the Times would think of that. [The Times owns radio stations.] I told him I Couldn’t imagine the Times would be overjoyed at this but at the same time I couldn't see such a bill getting through Congress if what he reported was true. He then said, ‘I think this is some information that you ought to pass on to your publisher before you write anything further about Commissioner Johnson’s opinions in anything’.”

(Both Nicholas Johnson and Senator Nelson say there is nothing to Gerrity’s story.)

Reporters for AP, UPI and Washington Post also claimed they were badgered by ITT public relations men in covering the story. Last week Miss Shanahan complained that friends and former employees told her that Jack Homer, the Washington public relations man for ITT, had made inquiries into her personal and professional life even after she testified before the commission. Asked if there was any truth to this. Homer said, “no comment.”

At any rate, this kind of work is right up ITT’s alley. In the summer of 1966, while the merger was pending, Harold S. Geneen, president of ITT, heard that ABC was having some difficulty with Nielsen ratings and sent along Gerrity to fix things up. Geneen’s memo to Gerrity said, “Leonard Goldenson [ABC president] tells me that Art Nielsen’s company has approached them re elimination of the 30 market Nielsen ratings. As you realize, ABC has the most interest in continuation of these ratings because they are the one place that they can show program performance on an equal coverage basis since there are 30 markets in which all three networks are fully represented.

“We have reason to believe that probably Columbia Broadcasting is behind such a move.

“In any event, will you call Art Nielsen and sound him out for (a) objections to doing this; and (b) suggest in a gentle way that since ABC is in the underdog position that the elimination of these ratings at this point would have a serious effect on its advertising presentation capability and competitive position and ‘we wouldn't blame them at all,’ if they wanted to react with a congressional inquiry or whatever thoughts you come up with that might make him think twice about doing it. . . .”

Nielsen still has its 30 market ratings, although there isn't anything to show that Gerrity’s work was responsible for their retention.

In their dissent Commissioners Johnson, Bartley and Cox had this to say about ABC’s future independence: “But for the brazen activities of ITT in this very proceeding it would never have occurred to us to suggest that the most probable threat to the integrity of ABC news would come from overt actions or written policy statements. Now that is clearly possible. But even now, we believe the most substantial threat comes from a far more subtle, almost unconscious process. ABC newsmen and their supervisors will know that ITT is the boss, and that ITT has sensitive business relations in various foreign countries, and that reporting on any number of industries and economic developments will touch the interests of ITT. The mere awareness of these interests will make it impossible for those news officials, no matter how conscientious, to report news and develop documentaries . . . the way that they would do if ABC remained unaffiliated with ITT. . . .

“Thus, the threat is not so much that documentaries or news stories adversely affecting the interests of ITT will be filmed and then killed, or slanted – although that is also a problem. It is that questionable story ideas, or news coverage, will never be proposed – whether for reasons of fear, insecurity, cynicism, realism, or unconscious avoidance.”

All this makes a good story. But TV hasn’t given it much play. A few short reports were about all you got on TV on the ITT-ABC case. Asked why there wasn't more coverage, an ABC newsman said, “In TV news stories that make the air are visual.” Then he said, “Can you imagine National Educational Television doing a story about the Ford Foundation which funds it?”

This article originally ran in the July 8, 1967, issue of the magazine.

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posted in: politics, american broadcasting company, itt, the times, american civil liberties union, congress, department of justice, federal communications commission, edward j. gerrity jr., eileen shanahan, ellery stone, james j. wadsworth, kenneth cox, lee loevinger, lionel kestenbaum, martin montreal, nicholas johnson, robert bartley, robert e. lee, rosel h. hyde

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