Prior to 1927, radio was regulated by the U.S. Department of Commerce, and Commerce Secretary Herbert Hoover played a strong role in shaping radio. His powers were limited by federal court decisions, however; in particular, he was not allowed to deny broadcasting licenses to anyone who wanted one. The result was that many people perceived the airwaves to suffer from "chaos," with too many stations trying to be heard on too few frequencies. (Initially only two frequencies were available for broadcasting with one of these being reserved for "Crop reports and weather forecasts.")
After several failed attempts to rectify this situation, Congress finally passed the Radio Act of 1927 (signed into law February 23, 1927), which transferred most of the responsibility for radio to a newly created Federal Radio Commission. (Some technical duties remained the responsibility of the Radio Division of the Department of Commerce.)
The Act did not authorize the Federal Radio Commission to make any rules regulating advertising. Advertising was mentioned in the Act with only slightly more authority than networking; merely requiring advertisers to identify themselves:
|“||All matter broadcast by any radio station for which service, money, or any other valuable consideration is directly paid, or promised to, or charged to, or accepted by, the station so broadcasting, from any person, firm, company, or corporation, shall at the time the same is so broadcast, be announced as paid for or furnished as the case may be, by such person, firm, company, or corporation.||”|
A forerunner of the "equal-time rule" was stated in section (18) of the Act which ordered stations to give equal opportunities for political candidates. The act did vest in the Federal Radio Commission the power to revoke licenses and give fines for violations of the Act.
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