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REPORT ON THE JOHNSONS’ TV INTERESTS extensive market , survey of the Austin area with respect to a second TV station. At one time or another in the last four or five years five groups have been interested in the project. One of these groups included ex-Gov. Allan Shivers. Three of the five sank considerable amounts of money into the inquiry. Businessmen investigating the technical situation, however, have discovered that under federal regulations a second television station is not physically feasible. One prominent businessman, concluding that a second station would be a good investment, had a Texas engineering firm investigate. In turn, this Texas firm studied a survey that had been prepared by a Washington firm which specializes in setting up TV stations. This, the Observer is advised, is the technical situation which prevents the application for a second channel for Austin. The Federal Communications Commission code requires that there be a distance of 190 miles between transmitters for channels of the same number and frequency. Houston, Bryan, Temple, San Antonio, Waco, all fall within 190 miles of Austin. Except for Channel 9 in San Antonio, reserved for education, the only channel conceivably open to Austin \(out of the twelve very high frequency channels which are physically available for television which is occupied in Houston. To conform with the 190-mile rule, the transmitter for Channel Two, Austin, would have to be located 20 miles west of Austin. Such a location, however, would fall on the other side of Balcones escarpment, a natural fault-line, and since TV has to be transmitted in a straight line and a relay tower would be regarded by the FCC as another primary point of broadcasting, a second station is technically unfeasible unless an exception is made for Austin. Investigating businessmen failed to turn up any evidence that FCC has varied from the 190-mile regulation in any instance in the United States, they have advised the Observer. Under the regulations, to get a transmitter high enough to broadcast to Austin from 20 miles west, “you’d have to hang the antenna by a balloon.” One group actually had land west of Austin surveyed, spending about $25,000 in all, and concluded the transmitter could not be built economically. A businessmen who went into the matter told the Observer that he had found no evidence that Johnson influence had inhibited the FCC from granting a second channel to Austin. The only other possibilitywhich may be the basis for the one appilcation apparently now pending-is a low-power local station which would not reach more than 60 to 70 miles beyond Austin. The case for such “dropin stations” to allow for geographical and other special situations is strong, in the view of interested businessmen. Austin people cannot get stations other than KTBC-TV unless they have a large antenna and possibly a good location \(say on stations on the other channels can be heard, and this could cause interference with a second local station. ‘A Monopoly’ Speaking somewhat circuitously, Lund said: THE TEXAS OBSERVER Page 8 December 18, 1959 “What we have found is that there is an underground resistance from here, up to the other end, which we don’t appreciate. “Of course, we have a monopoly here which is practically absolute -and don’t you think there’s a lot of indignation about it? It comes to me practically every day. “However, since the other matter is in the picture, I think that it would be inappropriate to say just what the situation is.” Lund said it had taken two or three years to get KASE on the air, “and that was a very difficult situation … I think the question is pending with the Federal Communications Commission. We have several questions which we hope to have the FCC answer satisfactorily. But you know, the FCC is slow.” The Observer asked Jesse Kellam, president and general mana-. ger of LBJ Co., whether the LBJ group has ever taken a position with FCC on whether a second station should be granted in Austin. “No,” he replied. Asked if there is now an application for a second station pending, Kellam replied, “Not to my knowledge.” Johnson’s Position Johnson does not regard his family’s interests in the radio-TV industry as a source of conflict of interest for him between his duties on the one hand as a senator and Democratic Majority Leader and, on the other, as the head of his family. He owns none of the stock; Mrs. Johnson’s is her separate property under Texas laws. Since she acquired her stock, Johnson maintains, he has never voted on any radio or TV controversy, as, for example, the confirmation of an FCC commissioner. Jo h n s o n’s position is that he has never received any favors from U. S. networks or advertisers. The issue came up obliquely in a question-and-answer session in Austin late in October during a Kiwanis Club appearance by the senior senator. “Senator,” he was asked, “might you have some influence with the management of our local TV station?” “I’d like to think I do,” he replied. “Then could you do something about getting Perry Mason on the program schedule?” After the laughter, Johnson said that actually he does not have a lot of influence with the management. “I am married to a lady who graduated from the University of Texas and who intended to pursue a career in journalism until we met,” he said. “A few years ago she took some of her money and put it in a radio station.” The TV channel was set up at the same time others were allocated to other cities. Austin was allocated one VHF \(very high ble channel and two UHF channels in 1948. Johnson said no one applied for any of them until Mrs. Johnson applied for the VHF channel in 1952. Her application was on file three or four months; no others applied; she got the permit. On the question of such a large city having only one channel, Johnson t o 1 d the Kiwanians: “Austin is one of 118 cities in the United States that have only one TV station. No one has seen fit to build one of the UHF stations. We tried to prove one would work in Waco and lost a quarter of a million dollars.” The Observer formally asked Sally Lindo, public information officer of the Federal Communications Commission in Washing ton, “whether Austin is the largest television area in the United States with only one television station.” She replied with some care: “The FCC has no statistics on the ranking of markets. As for other large places with only one TV station: Lancaster, Pa. \(if this is considered separately from Rome; Lincoln, Nebr.; Manchester, N. H. \(if this is considered Salinas Monterey, Calif.; Florence, S. C.; Monroe, La.; Macon, Ga., and others. Sorry, but FCC can’t attempt to be any more specific.” Austin is by far the largest city in Texas to which only one reguallocated. Other Texas cities with less population have two, three, or four such channels in Texas. Other one-VHF-TV towns in the state, seven of them, range in population at the 1950 census from 6,000 to 84,000, compared to 132,000 for Austin. They are Abilene, 45,000 persons in 1950; Big Spring, 17,000; Midland, 21,000; Monahans, 6,000; Odessa, 29,000; Sweetwater, 13,000; Waco, 84,000. In other Texas cities with comparable population, these are the number of channels and population as listed with FCC: Amarillo, four channels, 74,000 persons; Beaumont-Port Arthur, three channels, 151,000; Brownsville Harlingen Weslaco, two channel’s, 66,000; Corpus Christi, two channels, 108,000; El Paso, three channels, 130,485; Lubbock, three channels, 71,000; San Angelo, two channels, 52,000; Wichita Falls, two channels, 68,000. The Profit Situation Johnson also told the Kiwanians that some $2 million has been invested in the Austin station to date, and the stock has never paid a dividend. The station will develop new quarters that will cost about $700,000 and will take eight years to pay out, Johnson said. Last March, in an application to take over complete control of a Weslaco broadcasting company of which it then owned 50 percent, LBJ Co. filed with FCC a financial statement which showed that its assets have increased $400,000 since Dec. 31, 1956. The balance sheet showed that on Dec. 31, 1956, LBJ Co. had total assets of $1,516,516 and “surplus and profit” of $1,029,531. On Jan. 31, 1958, total assets were $1,917,656 and “surplus” \(no longer $1,190,110. Since most of the stock is held by the Johnson family, dividends are of less importance than the value of the stock. FCC files show that the LBJ Co. reported a “net profit” of $197,327 in one year. Variety Magazine quoted Kellam on Nov. 25 as saying that KTBC’s new studios will have about six times as much working space as the present ‘studios, which are squeezed into a corner on the street floor of the Driskill Hotel. The new studios will be 36 feet high and will contain 2,500 square feet of floor space and a 125-seat auditorium. There will be parking inside. The property which LBJ Co. will lease for these studios is owned by Brazos-Tenth St. Corp. Who, Kellam was asked, owns this corporation? “I don’t know,” he said. He mentioned Commod.ore E. H. Perry and Max Starcke. Kellam said that “the rental figure is very realistic.” Gifts from the Johnsons Johnson also told the Kiwanians in their public meeting, “There are eleven stockholders ‘besides Mrs. Johnson, most of them lawyers. I own no stock in the company. Mrs. Johnson has given some stock to our two daughters, and I might have some influence with them.” FCC files examined by the Observer in Washington include an instrument dated Jan. 2, 1959, recording gifts of stock from Mrs. Johnson to Lucy Baines Johnson and Lynda Bird Johnson \(held by note in the records in each case: “The donor was joined by her husband, Lyndon B. Johnson, in making this gift.” On Oct. 3, 1956, in an amendment to ownership reports, Kellam wrote to FCC, “In making these gifts, Claudia T. Johnson was joined by her husband, Lyndon B. Johnson, in such a manner as to enable these parties to avail themselves of the split gift provisions of the Internal Revenue Code.” In Austin, Kellam was asked how Johnson could join in a gift of stock he did not own. He said, “I don’t know, you’ll have to talk to lawyers about that.” He said he did understand the stock is Mrs. Johnson’s separate property. FCC’s file on KTBC-TV also includes a restriction-of-stock agreement dated Jan. 10, 1956, between Texas Broadcasting Corp. \(the and Claudia T. Johnson “joined by her husband, Lyndon B. Johnson, both of Blanco County, Texas The definition of Stockholder in this instrument reads, “The term ‘stockholder’ shall mean only a person owning part of the capital stock of the Corporation and who is now or hereafter becomes a party to this agreement.” The instrument was signed by Claudia T. Johnson and Lyndon B. Johnson, and by Claudia T. Johnson for Texas Broadcasting Corp. In a letter to FCC from the LBJ Co. dated March 9, 1959, Kellam, in setting out additional stock repurchase agreements, said, “As a result of the foregoing, Claudia T. Johnson owns 304 shares of common stock which are unrestricted and 34 shares that are restricted” in LBJ Co. Earlier, FCC spokesmen had given out this information on stockholders: Mrs. Johnson, 352 of 579 shares \(she is chairman of shares each, held in two trusts for them; Kellam, president, 32 shares; Paul Bolton, secretary, Walter Jenkins, \(Johnson’s administrative assistant in Washingseven shares; Donald S. Thomas, secretary, one share. In Kellam’s March 9, 1959 letter, he alludes to a stockholder repurchase agreement for Mary Margaret Wiley for one share. In an ownership report for the LBJ Co. dated Jan. 31, 1959, these figures are given: Jenkins 23; Kellam 35; Miss Wiley one; Sam Houston Johnson, one, “gift”; A. F. Vickland one; Lucy Baines and Lynda Bird Johnson, 30 each. Kellam, asked in Austin about present officers in LBJ Co., listed Mrs. Johnson, chairman of the board; Kellam, president and general manager; Bolton, Bobbitt, and Warren Woodward, vice presidents; Thomas, secretary; Jenkins, treasurer. As of Dec. 9, Kellam said, Woodward-a former assistant to Johnson-held two shares of stock. There had been, he said, other “insignificant changes” in stock ownership. Of Woodward, he said, “He will acquire more. 1 1,r;. , all hope to.” ‘Routine Letters’ Variety Magazine, in a story by Winston Bode on Nov. 25, reported that the advent of San Antonio’s “Texas Tall Tower” some 80 miles from Austin caused speculation that there might be some cutting into KTBC’s TV market. Kellam was quoted that there is some splitting of the sales pie in an overlap area, but he is still getting plenty of business. Broadcasting a n d Television Magazine reported in January, 1957, that ten senators and 20 house members had radio-TV tieins with 29 AM broadcast and two educational AM stations, seven FM broadcast stations and one educational FM station, and 20 commercial TV and two educational TV outlets. All radio and television stations are licensed and closely regulated by the Federal Communications Commission. The FCC is responsible to the Congress. Johnson as senator wrote letters to the FCC in 1952 and 1953 routinely transmitting letters from constituents concerning a KWTXTV application in Waco. Johnson requested in these letters to the FCC that the originals of the letters from the constituents be returned to his files. This, also, is described by Johnson staff people as “routine.” The application was granted in 1955. About a year later, FCC officials said, the LBJ Co. acquired 29 percent of KWTX-TV through a stock transfer, with the LBJ Co.’s UHF radio station KANG merging with KWTX-TV. On April 29, 1955, KWTX-TV of Waco had filed an anti-trust charge against KTBC-TV with FCC. The complaint had protested the action of FCC in granting, without