MERGER AND MONOPOLY ISSUES

Mr. O'CONNELL. To summarize, the best solution that I have for this overall problem is a merger as soon as it can be achieved.

Mr. ROBACK. As nearly comprehensive as possible, in your opin

ion.

Mr. O'CONNELL. Quite comprehensive.

Mr. ROBACK. So that Comsat and the carriers would become one, in effect.

Mr. O'CONNELL. Right. In the meantime, I think that we should

Mr. ROBACK. That would entail amendments to the Satellite Act, among other things.

Mr. O'CONNELL. It would involve amendments to the Satellite Act. Mr. ROBACK. And the Communications Act.

Mr. HOLIFIELD. What protection could we have against monopoly advantage in a deal like that?

Mr. O'CONNELL. Would you like to speak to that, Ralph ?

Mr. CLARK. We would have the same regulatory mechanism that we have domestically. Domestically, all of our telephone service is provided by public utility corporations that operate with an exclusive franchise in an area.

Mr. HOLIFIELD. That is right. But this has an international problem involved as well. With the domestic company, we can have greater control over it than we could with a mixed domestic and international.

Mr. CLARK. Yes. There we would have a separate international company, which would be separate from the domestic company, and the FCC would have the same authority to regulate possibly more authority as the draft legislation proposes. It would have authority comparable to the authority which it has with respect to Comsat to regulate the merged international carrier.

Mr. HOLIFIELD. What protection do we have as to international stations throughout the world, ground stations and their governments setting rates that might be exorbitant?

Mr. O'CONNELL. The situation there would not be different from what it is today, Mr. Chairman.

Mr. HOLIFIELD. I know that.

Mr. O'CONNELL. We operate on a half circuit basis. That is, on the cables, the foreign partner owns half the cable, and we own the other half. The FCC determines what can be charged to our users by our entity.

Mr. HOLIFIELD. In other words, there has to be a reciprocity of exchange between countries in order to facilitate the two-way communications.

Mr. O'CONNELL. Exactly.

Mr. HOLIFIELD. On an equitable basis.

Mr. O'CONNELL. This is always subject to negotiation and determination between the half owners. Here we have 53 owners of the space segment, but we still have the problem of negotiating between earth station owners in the United States and earth station owners in foreign countries.

One of the big disadvantages is that we speak with three or four voices-five voices now-to our foreign friends and partners

Mr. ROBACK. Is that not one

Mr. O'CONNELL (continuing). Speaking of cable, et cetera, whereas a merged entity could speak with one voice for the United States.

Mr. ROBACK. Was that not one of the problems in this recent competition? Every offeror ran overseas, or picked up his own telephone and called his counterpart over there and tried to make a deal, and it was confusing on the other side, was it not?

Mr. O'CONNELL. I am afraid so.

Mr. ROBACK. And they wanted to know really who was representing whom. So if you want to have competition in this business, you are going to have everybody making his own deal. Is that right?

Mr. O'CONNELL. That is right.

Mr. ROBACK. You are

Mr. O'CONNELL. The FCC does exercise a coordinating influence on this.

Mr. ROBACK. The FCC.

Mr. O'CONNELL. Yes. In my opinion they have done a fine job. Mr. ROBACK. In other words, let them all have equal time. [Laughter.]

Mr. HOLIFIELD. Mr. Dahlin.

Mr. DAHLIN. Thank you, Mr. Chairman.

Mr. O'Connell, you note on pages 72 and 73 there is a policy published with respect to how to handle foreign requests. Is that policy contained in that letter from the State Department that was mentioned by Mr. Morris or do you have a separate policy issuance from your own office on how to treat requests for participation in communication satellites?

Mr. O'CONNELL. This is a matter that I would be glad to go into with the committee in executive session.

Mr. DAHLIN. Do you have a copy of this policy that you can submit for the committee files?

Mr. O'CONNELL. I do, I would prefer to supply it in executive session. It is a classified matter.

CRITERIA FOR PUTTING SYSTEMS INTO NCS

Mr. DAHLIN. You mentioned the systems being put into the NCS. Is that a function of your office or of the Executive Agent to decide what systems go into the NCS?

Mr. O'CONNELL. It is a function of the Executive Agent to make the analysis, to make the determination and to make recommendations to

me.

Mr. DAHLIN. How about the criteria for putting them in?

Mr. O'CONNELL. It usually is consolidated into the annual longrange plan of the NCS. We are in a position of approving that for the President or sending it to the President for approval.

Mr. DAHLIN. Can you give us a list of these 48 systems that are now included?

Mr. O'CONNELL. Yes.

Mr. DAHLIN. Have you been informed of each one of those as they come in or do you consult with the Executive Agent on the inclusion of each separate system?

Mr. O'CONNELL. I do not recall consulting on each and every one. At intervals we get reports that additional systems have been designated by the Manager and Executive Agent, and we generally concur. The listing of the systems is classified confidential. We will furnish it to the committee separately.

LISTING OF NATIONAL GOALS

Mr. DAHLIN. As to the listing of the national goals, is there now an official statement of the national goals listing the U.S. use of the spectrum, that comes from your office?

Mr. O'CONNELL. You have one that comes from my office, and you have a copy of it.

Mr. DAHLIN. Is there coordination between what you have done in that document, and with the FCC work; is that fully coordinated?

Mr. O'CONNELL. This covers only the use of frequencies by the Federal Government. However, it was coordinated with the FCC. They concur with it. This is a Manual of Regulations and Procedures for Radio Frequency Management issued by me. It does have a chapter-chapter 2-on national policies and goals. You might wish to include that chapter in the record.

CATALOG OF COMMUNICATIONS ACTIVITIES

Mr. DAHLIN. The conduct of the catalog, I take it, is a continuing effort. Is that both by contract and inside the Government? How are you running this catalog of Government activities you are trying to achieve?

Mr. O'CONNELL. We do that internally within the Government and put out reports at intervals. This is one area in which very significant progress has been made by our group. Two years ago we were running 17 weeks behind in compiling the assignments to Government agencies. At the present time, I think we are about 1 week behind, is that right?

Mr. PLUMMER. At the close of the particular volume, it is about 6 weeks until we get it to the printer. There are built-in time elements that you cannot beat by very much.

NEED FOR NCS COMMAND AND CONTROL DECISIONS

Mr. DAHLIN. On page 35 of your statement, at the bottom, you refer-with respect to the NCS again-to fundamental command and control decisions that need to be made. Are those the same matters you were talking about before, with respect to what is policy and what is operational decision, or are you referring to other issues here? Mr. O'CONNELL. I am referring to other matters there.

Mr. DAHLIN. Do you mean by command control decisions as to who is running the NCS and how, or do you mean by that how the agencies under that will organize their command and control?

Mr. O'CONNELL. How they will organize and how the operation will be managed and actually operated. We have run into this problem

a great number of times. In North Africa we had this problem, in Europe we had this problem, in Japan we had this problem-it is very difficult to run a long-lines system when there is a large number of entities making intermediate decisions as to how the system shall be run. The A.T. & T. has found this to be true, and has organized, therefore, the Long Lines Division of the A.T. & T. Co., which is separately operated. They have very well-developed, highly standardized practíces, policies, and assignments of responsibility for the operation of that system. This is very difficult to do when you have, let us say, 47 different organizations doing the actual operation of these systems.

INTERCONNECTION OF NCS AND STATE SYSTEMS

Mr. DAHLIN. On page 38, you refer to the question of interconnection of NCS and State systems. Does this bear on the problem of using switching and other arrangements to include the State systems in the NCS? And does that bear on the questions of what assets are interstate in nature and what become intrastate? That is, does this refer to

Mr. O'CONNELL. I think it bears on all of the things that you have mentioned. It bears first on the question of what joint requirements exist between Federal and State governments.

For example, in the Medicare program, it bears on the reporting of various State, and local, and Federal facilities located within the State. How are you going to pull together the reporting of what the patient load is? There is a need here for getting the Federal and State and the local agencies together in reporting, consolidation of statistics, and in communications. They can obviously help each other by the exchange of supplies.

Another point of consideration is whether the State can use Federal Telpaking. I believe the costs incurred by the States could be reduced, if they were to utilize Federal Telpaking. This reduction would be on the order of about two-thirds. That is, if the States would get going with the Federal Government and take advantage of the wholesale rates involved in the long lines offering of Telpak service. This is a considerable amount of money in the 50 States.

Mr. DAHLIN. On the bottom of page 39 you seem to say that there is an urgent need to join these systems in emergency situations. Are you suggesting that some arrangements be made for some type of emergency switching or switches that are placed in one status in one case and joined only in emergencies or what are you suggesting?

Mr. O'CONNELL. Well, not only that. There certainly would be the capability for interconnection of the systems, and there would be some practicing done in accomplishing this interconnection. First of all, the systems would be designed to be electrically compatible so that the switching could be accomplished. The means for interconnection should be actually available, and then the systems should be exercised so that everybody finds out how to do it. Therefore, in an emergency it could be effectively, rapidly, and efficiently accomplished.

POLICING OF FREQUENCY USE

Mr. DAHLIN. Have you described how the policing and inspection of the Government radio system and use of the spectrum is accom

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plished? Is that delegated out to the agencies? Are you managing that now?

Mr. O'CONNELL. No; we are endeavoring to do this within the limited resources of the office. Mr. Plummer, would you like to speak on this? Here is an area where we need to do much more, and we need an increase in personnel to do it. What we have done so far is to get a system of inspection started, to find out by a limited number of trips what we are going to be up against, to develop a procedure and a methodology for conducting such inspections. I should say that the inspections that we have held have indicated that the agencies have high standards of frequency discipline and frequency use.

Would you like to amplify that?

Mr. PLUMMER. Yes, sir; that is correct. We, by taking people away from other work, have managed to have about one-half man-year devoted to this effort, to make arrangements with a particular agency to go visit a station, to see how they operate, what the facilities are, whether they are using frequencies in accordance with terms of authorization, and whether they have frequencies they are not using.

The results of inspections are written up in a report, and coordinated with the agency operating the station that was inspected to make sure we use facts only. It is then submitted to Mr. O'Connell for approval. Upon approval a copy is sent to the head of the agency, and to the frequency manager of the agency. We have visited the Army, Navy, Treasury Department, FBI, Interior, AEC, about six or seven a year, depending on how much time we can spare for it. It is really only token inspection. We feel it is accomplishing a lot though, because the agencies have come to expect it. They do not know where we will go next, and so they naturally improve and present a good picture. Out of the 12 or 14 we have inspected to date, we found only 1 frequency that was not properly authorized. That has been corrected. Mr. DAHLIN. How about the problem on page 77 where you areMr. O'CONNELL. I think I should say this has never been done before.

Mr. PLUMMER. That is right.

Mr. O'CONNELL. In the 40 years that the Federal Government has been handling this frequency business, no previous

Mr. DAHLIN. You are doing it partly by inspection and publicity, as an inspector general function, rather than delegating

Mr. PLUMMER. I might add we have no monitoring facilities to take the signal off the air.

Mr. DAHLIN. A related question-where you talk about hazards to life and property from such things as garage door openers, do you have many cases a year where this affects the Government agencies and vice verse? Do those reports come to your office, is that the place where these kinds of complaints or problems come to you?

Mr. O'CONNELL. Yes. Through the agencies. In other words, if a military airport has difficulty and receives interference because of garage door openers, it is reported to the local FCC district for immediate relief. We will, in some cases at least, receive notification of this in my office, not always.

I think that this is a place where improvement can be made.

Mr. PLUMMER. I might say-these opener units are being built and installed far faster than we can find and correct them. The FCC has been working very well with us on this matter. It takes a terrific