Back in 1951, the Watertown, N.Y., Daily Times management decided that it had to raise circulation rates.

John B. Johnson, the president, publisher, corporate treasurer and editor (he's also listed as the book editor called into his office a reporter who had been with the paper about four and a half years and said: "We owe the readers something" in exchange for the increased price.

What Johnson told reporter Alan S. Emory was that the Times thought it should open a Washington bureau for the first time, as a service for its readers. Emory, a graduate of Harvard and Columbia University's graduate school of journalism, moved here that fall and has been a prolific chroniclar of the federal government ever since.

Not many newspapers the size of the Watertown Times (Monday-Saturday evening circulation of 42,000) have a correspondent in the nation's capital. But the Watertown paper is unusual in many respects.

For one thing, the Times is an example of what some press critics see as an endangered species - the independent, locally owned newspaper. Of 1,7862 U.S. dailies, about 1,050 (60 per cent) today are owned by 170 companies that publish two or more papers. Remaining independents have been disappearing at a rate of more than 50 a year.

The Watertown Times also is far above average for small or medium sized newspapers in the quality and depth of its news coverage. The Times provides broad national and international coverage, and excels in state and local reporting.

It's the sort of newspaper Rep. Morris Udall (D-Ariz.) wants protected from ownership concentration and "chain store news."

And it's the sort of newspaper described earlier this year by a chain president, Alvah H. Chapman Jr., of the Knight-Ridder papers, when he said all newspapers should be guided by the best professional editors and managers:

"If the third generation publisher family member is professionally competent, if his resources are adequate, if his commitment is strong and if he can attract a good group of professionally trained executives and editors under single family ownership, an excellent newspaper will result as it does in many cases."

Chapman also emphasized his belief that a nationwide publishing group, with a strong commitment, "is an equally good bet to provide the reader with an excellent newspaper."

With investments in modern printing technology, such that Washington correspondent Emory sends his copy to the Watertown Times from a video display terminal in his National Press Building office, the upstate New York paper is an example of a family-owned company seeking to maintain a quality product as well as continued ownership.

But, given current economic trends and the absence of any significant support for a federal government curb on newspaper chain expansion, the Watertown Times and newspapers with a similar ownership pattern will remain that way only through determination of the owners to turn aside potentially lucrative purchase offers.

One small California daily, with annual revenues of $5 million, was sold recently for $17 million. Single newspapers in smaller and medium-sized communities are considered prime candidates for growing national newspaper companies because the local papers are dominant advertising media and because circulation and advertising are expected to grow outside large metropolitan centers for the balance of the Twentieth Century.

But Chapman takes issue with suggestions that simply because a chain owner takes over a newspaper, it will be worse. While there are chains "that lack" a strong commitment to quality papers there are "many individually owned newspapers . . . that are a disgrace to American journalism." he said in a Brigham Young University address last April.

The newspaper business in the U.S. was largely a family operation until the 1950s and that fact is at the root of the current controversy over ownership and chain newspaper quality. For various reasons, family heirs have wanted to sell their properties. At the same time, the newspaper business has become more professional in management and editors and publishers of many papers no longer are selected largely because of family ties.

When Udall was seeking the Democratic Party's nomination for the Presidency last year, a central theme of his campaign was a warning about concentration of ownership in many industries. He argued that conglomerates and giant corporations had become bigger than government regulators and said current antitrust laws were not effective in halting the trend.

After the Gannett Co. purchased the Tueson Citizen in Udall's hometown, he decided to add newspaper publishing to a list of industries he wants studied by a government commission on ownership concentration.

Udall also urged a moratorium on additional acquisitions of independent newspapers by chains until the proposed concentration study is completed. "It's awfully hard to unscramble an egg," once a deal has been made, Udall said.

"I've had about 20 letters from different newspaper people pouring out their hearts on this, telling about economic pressures, saying their kids aren't interested in the business," and expressing the hope that something can be done to keep papers in local hands, he said.

The congressman said a common theme to the letters is that both inheritance and business tax laws "almost are forcing papers to merge and chains to by often at twice what the paper is worth."

Separately, a former California publisher told The Washington Post that the chains "He ally have the capacity [WORD ILLEGIBLE] money by issuing new stock" [WORD ILLEGIBLE] newspaper properties.

The chains borrow money to [WORD ILLEGIBLE] wing an economic muscle local groups of potential investors have a hard time fighting off.

Even some of the large communications companies are complaining about the high prices being paid for newspaper properties.

Udall compares family newspapers with family farms as a type of business that should be protected. He said there may be "a lot of sentiment" on Capitol Hill to support a change in the tax laws that would spread out inheritance payments over a number of years for persons deciding to continue independent papers. But he said such legislation would need "a solid phalanx of support from the publishing business."

Newspaper publishers and editors have expressed concern about the current situation, with economic forces and tax laws combining to make many independent newspapers but links in growing chains.

"I don't like to see that enormous expansion of the chains and I'll be damned if I know what you do about it," commented New York Times columnist James Reston. He agreed that tax laws should be studied, citing historic government policy of cheaper postal rates for periodicals in order to support a flow of information "in a vast continental country . . . it would seem to me that to tax newspapers precisely the way you would tax a manufacturing company is not right . . . we are getting a newspaper depletion under the present system for a variety of very complicated reasons . . ."

One problem facing some independent newspaper firms, for example is cross-ownership of broadcast properties. A good example is the Watertown Times, Brockway Co., owner of the newspaper, also owns the Watertown radio and television stations and thus has a so-called media monoply in the upstate New York Community.

The Federal Communications Commission has decided that cross-ownership in Watertown and six other cities must be ended by 1980, because the companies involved own both the only television station and newspaper. The FCC also decided that existing cross-ownership could continue in other communities (where newspapers own 135 A.M. 96 FM and 60 TV stations), because there are competing media. The FCC said, however, that when any of these stations are said the cross-ownership must end.

When the FCC order was appeared to the U.S. Court of Appeals here, the agency was overturned and all cross-ownership arrangements were declared to be illegal. That decision now has been appealed to the Supreme Court and Billions of dollars of broadcast revenues are at stake.

Established in 1861, the Watertown Times was purchased in the 1920s by Harold B. Johnson father of the current owner. Under Johnson, the Times became embroiled in a debate over public power. A competing paper, the Standard, supported the business community in fighting against a municipal power company while the Times favored public power. After voters supported municipal power, the Standard's fortunes waned and it closed.

Harold Johnson and his son since have operated the Times in the belief that, especially as the only daily in the area, it should be "an outstanding local service newspaper," Emory said.

"The paper could make a lot more money by cutting back on its New York State and Washington reporting . . . . they could get away with it and many people there wouldn't recognize the difference," he added.

The Times has full-time correspondents in eight bureaus around its circulation area - mostly north of the city, up to the Canadian border - as well as a bureau in Albany, the state capital.

Competition for North Country news used to be intense between the Times and the Syracuse Post-Standard, but the Syracuse paper has redcued the number of editions it used to publish and its news coverage now is overshadowed by the Times.

Most national and international news in the Times comes from wire services, business news is aparse and much local news resembles the run of engagement, wedding, fund-raising and reunion items that are so much a part of America's small papers.

But the Times also has provided its readers with reporting by its own correspondents of statewide elections, national political conventions since 1948, campaign coverage of presidential and vice presidential candidates and - as an "extra dimension" - coverage of the last week of New York races for U.S. senator.

Emory covers Canadian news developments extensively from Washington because of Watertown's proximity to Canada and, at 55, is known as the "dean" of New York State newspaper reporters covering the broad range of news developments from Washington.

Other reporters from the Watertown newspaper have been sent out on various assignments around the country, often to study a development which affects a local issue.

Emory said he is disturbed that so few newspapers make attempts to develop a distinctive report for their readers. He attributes it partly to the growth of newspaper chains and the unwillingness of some chains to spend money on the editorial product.

Ironically, he said, "we find our competitin now mostly from our own television news people," employees of the company -owned station in Watertown.