At the present time, the Philippine Government has not yet made a final determination as to the entity that would be responsible for its satellite communications. Hence, no final action has been taken with respect to the proposed memorandum of understanding and proposed lease agreement which were discussed with its representatives.

The results of our efforts were communicated informally to the DCA in April of this year and included our determination as to the feasibility of providing the desired service as well as cost estimates for this service.

On May 2, 1966, DCA requested the submission by the corporation and other international carriers of proposals for the providing of 30 Pacific satellite circuits, to consist of 10 circuits between Hawaii and each of Japan, Thailand, and the Philippines. Comsat submitted its proposal on May 31, 1966. In its request for such proposals, as noted by the Department of Defense in a subsequent public announcement, it "stressed the urgency of the requirements to meet current military activities connected with southeast Asia." On July 1, 1966, DCA issued to Comsat a notice of award indicating—

The Department of Defense has concluded that the carrier whose proposal offers the greatest advantage to the Government and affords the greatest assurance of providing the earliest possible service is the U.S. Communication Satellite Corp. The Department of Defense intends, therefore, to initiate immediately negotiations to definitize a contract with your corporation.

We then proceeded to the negotiation of a communications service authorization. This was signed by DCA on July 26, 1966.

We are pleased with this expression of confidence in our ability to meet the needs of DCA with the greatest assurance of providing the earliest possible service and with the greatest advantage to the Government. We intend not to fail in that trust.

Mr. MOORHEAD. Dr. Charyk, on page 11 you refer to the FCC's authorized user policy which was issued. Could you briefly, for my benefit, tell me what the effect of that decision was.

Dr. CHARYK. Insofar as service to the Government is concerned, the FCC position is that the Government should be allowed to deal with the corporation only in the case of unique and special require

ments.

It is the corporation's reading of the law that there are no restrictions on the Government's ability to deal directly with the corporation whenever the executive branch of the Government decides that it is in the interest of the Government to do so. So we have a basic difference of opinion with the FCC. We have petitioned for a reconsideration of the FCC decision in this matter, and this is now pending. Mr. MOORHEAD. I thank you, sir.

Mr. HOLIFIELD. Mr. Dickinson.

Mr. DICKINSON. Well, to carry a little further the question just put to you, would you explain what you mean at the bottom of page 11 there when you say:

It would be, indeed, a sorry situation if the availability of these facilities to meet important needs of our Defense Department were allowed to be delayed

or frustrated by actions aimed at winning a particular position or establishing a particular precedent.

What does that mean?

Dr. CHARYK. Well, I should indicate that the communications carriers are taking the position that the corporation should be strictly a carrier's carrier. In other words, we should deal only with carriers. The corporation's position is that, as we read the law, the Government can deal directly with the corporation if it desires to do so. So that we do have a basic difference of opinion between Comsat and the carriers as to our ability to deal directly with the Government.

It is now a contentious item, and we are hoping for an early resolution so that there will not be any impediment placed in the way of providing this service under the most favorable conditions to the Government at the earliest possible date.

Mr. DICKINSON. That is what you meant by the sentence that I just read?

Dr. CHARYK. That is right. It is pretty easy to delay implementation of this program through various procedural techniques. We hope that this does not occur.

Mr. HOLIFIELD. Is that all?

Mr. DICKINSON. Yes.

Mr. HOLIFIELD. Mr. Roback.

Mr. ROBACK. What happens if the FCC does not come out with the required or desired permission, what is the next step?

Dr. CHARYK. We have filed an application which reiterates our original position, but it also indicates that if the FCC does not agree with our position it should waive its regulation in any event and permit the service to proceed on this basis pending a full discussion and consideration of the issue. This is included in our filing yesterday with the Commission.

(The application filed on September 6, 1966, referred to above, follows:)

Before the Federal Communications Commission, Washington, D.C.

File No. T-C-2021

In the Matter of Communications Satellite Corporation application for authorization to acquire 30 full-time units of satellite utilization in the INTELSAT II satellite, to acquire 10 full-time voice-grade circuits between the INTELSAT II Pacific satellite and each of Japan, Thailand, and the Philippines, and to provide through service directly to the Defense Communications Agency by combining such units and circuits

APPLICATION OF COMMUNICATIONS SATELLITE CORPORATION

Communications Satellite Corporation ("Comsat" or "Applicant") hereby applies, in compliance with the Commission's Order and Authorization, dated November 10, 1965 (File No. 3-CSS-P-66), Section 214 of the Communications Act of 1934, as amended ("Communications Act"), and the Memorandum Opinion and Statement of Policy in Docket No. 16058 (the "Decision") issued July 21, 1966, 4 FCC 2d 421, for authorization to acquire from the International Telecommunications Satellite Consortium (INTELSAT) 30 full-time units of satellite utilization ("units") in the INTELSAT II Pacific satellite, to acquire from the respective foreign communications entities 10 full-time voice-grade circuits between the INTELSAT II Pacific satellite and each of Japan, Thailand, and the Philippines, and to provide through service directly to the Defense Communications Agency (DCA) of the United States Department of Defense (DOD)

by combining such units and circuits into 30 full-time alternate voice-data circuits.

In support of this Application, Comsat submits the following information: 1. Applicant is a corporation organized and existing under the laws of the District of Columbia, pursuant to the Communications Satellite Act of 1962 (the "Satellite Act").

2. Correspondence concerning this Application may be addressed to Allen E. Throop, Vice President and General Counsel, Commuuications Satellite Corporation, 1900 L Street NW., Washington, D.C.

3. Applicant is, by virtue of the Satellite Act, a common carrier subject to the provisions of the Communications Act.

4. The principal business of the Applicant, is set forth in Section 305 (a) of the Satellite Act, is to plan, initiate, construct, own, manage and operate a commercial communications satellite system, to furnish for hire channels of communications to authorized entities, including the United States Government, and to own and operate satellite terminal stations when licensed by the Commission under Section 201 (c) (7) of the Satellite Act.

5. On May 2, 1966, DCA issued to Comsat a request for proposals (RFP) with respect to furnishing 30 satellite circuits on a 24-hour a day basis beginning on or about April 1, 1967, between Hawaii and the Far East. Comsat has been informed that the RFP was also sent to ITT World Communications Inc., RCA Communications, Inc., Western Union International, Inc., and Hawaiian Telephone Company. Comsat submitted its proposal to DCA on May 31, 1966, and a copy was furnished to the Commission. On July 1, 1966, Comsat was informed by letter that its proposal had been accepted. The letter from DCA contained the following language:

"After evaluation of all the above [Comsat's and the other carriers' proposals], the Department of Defense has concluded that the carrier whose proposal offers the greatest advantage to the Government and affords the greatest assurance of providing the earliest possible service is the U.S. Communications Satellite Corporation."

6. Immediately following the award, Comsat entered into discussions with DCA concerning the details of the desired service. On July 11, 1966, DCA transmitted to Comsat its formal request for the service in the form of a proposed preliminary Communication Service Authorization (CSA), which called for the following service:

a. 10 alternate voice/data channels between the Hawaiian earth station and the Japanese International Message Center, to be made available by June 1, 1967, or as soon thereafter at 24-hour service is available.1

b. 10 alternate voice/data channels between the Hawaiian earth station and the Defense Communciations System Technical Control Facility at Clark Air Force Base, Philippines, to be made available by April 1, 1967; and

c. 10 alternate voice/data channels between the Hawaiian earth station and the Defense Communications System Technical Control Facility at Clark Air Thailand, to be made available by April 1, 1967.

Following this, Comsat and DC conducted negotiations as to certain terms of the proposed CSA. On July 25, 1966, Comsat signed and returned to DCA a somewhat revised preliminary CSA, reflecting the results of the negotiations with DCA.

Such revised CSA was signed in behalf of DCA on July 26, 1966, and returned to Comsat. The CSA was issued in accordance with the provisions of a Basic Agreement, in customary form, entered into between Comsat and the Department of Defense, dated June 1, 1966, which provided for the furnishing from time to time of satellite communications service, pursuant to appropriate supplemental communication service authorizations and in accordance with lawfully established requirements of appropriate regulatory authorities.

7. Initially, the satellites to be used in furnishing the service to DCA are those of the INTELSAT II series, covered by the Commission's authorization in File No. 3-CSS-P-66. As the Commission is aware, the satellites will be used, among other things, to meet the communications requirements of the National Aeronautics and Space Administration (NASA) during the Apollo Space Program. However, they will also be capable of providing, between standard earth stations, approximately 100 additional voice-grade circuits in the Atlantic and approximately

1 It is probable that 24-hour service between Japan and Hawaii will be delayed until October 1, 1967, due to the need for certain modifications in the Japanese earth station required for such service.

150 additional voice-grade circuits in the Pacific for other satellite communications uses, as well as meeting the presently anticipated requirements of NASA. Comsat proposes to use a portion of the capacity of the INTELSAT II satellite to be positioned over the Pacific Ocean in providing the service to DCA. It is anticipated that this satellite will have a total capacity of 240 equivalent voicegrade circuits, or 480 units of satellite utilization. The presently anticipated NASA requirement in the Pacific will utilize approximately 150 units. As mentioned previously, a total of 30 voice-grade circuits is required to provide service to DCA. This will initially require approximately 170 units of satellite utilization, in view of the planned use by Thailand and the anticipated use by the Philippine communication entity, at the outset, of transportable earth stations having 42-foot diameter antennas.2

The remaining 160 units of satellite capacity in the Pacific INTELSAT II satellite not required for the provision of the proposed service to DCA or for meeting the presently contemplated NASA requirements will be available for other commercial traffic. At such time as the earth stations are upgraded to meet performance specifications for standard stations (as defined by the ICSC (85-foot diameter antenna, G/T 39.0 db)), thereby replacing the less efficient transportable stations in Thailand and the Philippines, additional capacity will become available. The only United States earth station facility to be used in connection with this service is the earth station complex at Paumalu, Hawaii, File No. 5-CSG-P-66.

8. The instant Application is being filed to meet, inter alia, the following requirement contained in the Commission's Order in File No. 3-CSS-P-66:

Comsat shall not apply to the Interim Communications Satellite Committee for any units of satellite utilization nor use any units they may obtain except in accordance with an instrument of authorization issued by the Commission upon consideration of an appropriate application duly filed by Comsat.

9. Comsat has heretofore entered into preliminary Memorandum of Understanding with Kokusai Denshin Denwa Co., Ltd. (KDD), the Japanese telecommunications entity, and the Thailand Government, respectively, as stated above, and is awaiting a reply from the Philippine Government (see footnote, page 6, supra). An understanding has been reached with KDD on the terms of a final agreement, and negotiations are under way to conclude with the Thailand Government a final agreement based on the Memorandum of Understanding between the Thailand Government and Comsat.

10. Comsat's annual charge of $48,000 for that portion of each circuit between the Hawaiian earth station and the satellite was derived by taking the basic charge proposed to be applicable to circuits furnished by Comsat to carriers between the Hawaiian earth station and the satellite for communication with the Far East (as shown by the Report on Rates and Revenue Requirements, 1967-1971, filed by Comsat with the Commission in Docket No. 16070 on July 6, 1966), namely $45,600, and adding thereto the estimated cost ($2,400 per circuit per annum) of those additional services required by DCA from Comsat which would not be provided by Comsat to communications carriers and are therefore not reflected in the basic charge. Accordingly, the total monthly charge for each circuit to be furnished to DCA, which Comsat will publish in a tariff covering the offering of service to DCA is as follows:

Hawaii to Japan: The sum of $4,000 representing the charge for that portion of the circuit between the Hawaiian earth station and the satellite; plus the charge of KDD for that portion of the circuit between the satellite and The Japanese International Message Center.

Hawaii to Thailand: The sum of $4,000, representing the charge for that portion of the circuit between the Hawaiian earth station and the satellite;

2 In the case of the Philippines, Comsat has had discussions with Government representatives, and a preliminary Memorandum of Understanding was submitted by Comsat to such representatives for their consideration. Comsat's proposal to DCA to furnish 10 circuits between Hawaii and the Philippines was made contingent on Comsat's ability to conclude arrangements for the acquisition from an appropriately designated communications entity in the Philippines of the half circuits between the specified Philippine terminus and the satellite. In the aforementioned discussions, Comsat undertook, if requested, to make available on a temporary basis under lease a 42-foot transportable earth station for use in the Philippines, pending the eastablishment of permanent earth station facilities. With respect to Thailand, Comsat has entered into an agreement with the Thai Government providing for its leasing from Comsat of a 42-foot transportable earth station, pending the establishment by Thailand of permanent earth station facilities. Comsat's arrangements with the Japanese Telecommunications entity call for the utilization by it, from the outset, of an 85-foot diameter antenna.

plus the charge of the Thailand communications administration for that portion of the circuit between the satellite and the Defense Communications System Technical Control Facility in Thailand.

Hawaii to the Philippines: The sum of 4,000, representing the charge for that portion of the circuit between the Hawaiian earth station and the satellite; plus the charge of the Philippine communications entity for that portion of the circuit between the satellite and the Defense Communications System Technical Control Facility in the Philippines.

11. As stated above, the proposed service to DCA will be furnished pursuant to a duly published tariff. Section 203 (b) of the Communications Act and Section 61.58 of the Commission's Rules and Regulations do not require the filing of such tariff until 30 days prior to its effective date, and as stated above, the earliest date for the proposed service is April 1, 1967. However, it is expected that the tariff covering the offering of this service will be filed significantly in advance of that date. Assuming that the necessary authorizations have been obtained, the aforementioned tariff may be filed with the other planned tariff filings for service to common carriers, based on the early expansion of Atlantic service and the institution of Pacific service, all as described in Comsat's letter to the Commission of July 6, 1966 in Docket No. 16070. Accounting will be performed in accordance with such Rules, Regulations and Orders of the Commission as are or may be applicable to Applicant's accounting procedures.

12. It is Comsat's position that, in view of the provisions of Section 305 (b) (4) and 201 (a) (6) of the Satellite Act, the United States Government may obtain service directly from Comsat without any special authorization to that effect, if such service is desired by the Executive Branch, subject to the filing and approval of such applications for facilities and the effectiveness of such tariffs as may be appropriate. A full statement of Comsat's position is to be found in its Brief and Statement, dated November 1, 1965, and its Reply Brief and Reply Statement, dated December 31, 1965, and its currently pending Petition for Reconstruction and Clarification, dated August 22, 1966, all in the Authorized User Proceeding (FCC Docket No. 16058).

13. In the Decision the Commission recognizes that the United States Government is an "authorized user." However, it appears from the Decision that, contrary to Comsat's legal position, the Commission would not approve any proposal to provide specific service to the U.S. Government unless certain criteria set forth in the Decision are met by showings on the part of Comsat with respect to such services which are in conformity with the requirements set forth in Paragraph 39 thereof. Accordingly, without prejudice to Comsat's legal position, under which the requirement of satisfying the specified criteria would be inconsistent with the Satellite Act, Comsat submits the following information called for by Paragraph 39 of the Decision:

As to Item (i):

Although access to the INTELSAT II Pacific satellite would, of course, be provided by Comsat to any authorized terrestrial carrier on a non-discriminatory basis, Comsat is not informed as to whether the proposed service could be made available by any terrestrial carrier in accordance with the requirements of DCA. With respect to the requests which have been made for such service, Comsat responded to the request by DCA for proposals and has been advised that a copy of this request has been furnished to the Commission.

As to Item (ii):

The information called for by this item is already within the possession of the Commission (File Nos. 5-CSG-P-66 and 3-CSS-P-66).

As to Item (iii):

Comsat's information as to the facts called for by this item has been obtaineɑ from the letter to Comsat from DCA of July 1, 1966, advising it of the DCA award, and from the DOD Release making public announcement of that award.

(a) In its letter, as stated above, (see para. 5), DCA acknowledged Comsat's response to its request for a proposal for "these urgently needed services", and stated that, after evaluation of all the proposals received, "the Department of Defense has concluded that the carrier whose proposal offers the greatest advantage to the Government and affords the greatest assurance of providing the earliest possible service is the U.S. Communication Satellite Corporation."

(b) In its Release, DOD referred to the fact that, in its request for proposals to provide the desired service, it had "stressed the urgency of the requirement