Page images
PDF
EPUB

DEFENSE COMMUNICATIONS AGENCY,
Washington, D.C., March 3, 1966.

Mr. JOSEPH J. GANCIE,

Vice President,

ITT World Communications, Inc.,
Washington, D.C.

DEAR MR. GANCIE: Your letter of February 24, 1966, to Admiral Boyle concerning commercial satellite service reveals a possible misunderstanding which should be clarified. Your statement that you now understand that DCA has inquired only of Comsat for channels because DCA has been so directed by higher authority does not accurately reflect the situation.

The inquiry to Comsat concerning the provision of certain communications services is in accord with the current practice of obtaining international communications service from the carrier providing the transoceanic segment of that service; requiring that carrier to insure the technical sufficiency of the channel and to make necessary arrangements with the foreign correspondent. There are significant operational and administrative advantages which accrue from this practice.

In summary, the DCA was not directed to secure satellite channels solely from Comsat but was merely following its longstanding practice with respect. to international circuits.

Sincerely,

LEE M. PASCHALL,

Colonel, U.S. Air Force, Assistant Director,
Programs and Requirements, DCS.

Rear Adm. F. D. BOYLE,

ITT WORLD COMMUNICATIONS INC.,
Washington, D.C., February 24, 1966.

U.S. Navy, Deputy Director, Communications Satellite Project Officer, Defense Communications Agency, Washington, D.C.

DEAR ADMIRAL BOYLE: Thank you very much for affording us the opportunity on February 11 to discuss with you and your associates the requirements of the Defense Communications Agency (DCA) for satellite channels to and from the Philippines and to and from Thailand.

We sought that opportunity solely because, as a common carrier serving the needs of DCA for communications channels, as well as other needs, we believe we are in a position to supply the desired satellite channels. We were concerned over the fact that we had not heard directly of requirements for satellite channels. ITT World Communications had learned of this need only indirectly from Comsat. It is now understood, as you explained, that inquiry was made by DCA only of Comsat because DCA has been directed by higher authority to secure satellite channels solely from Comsat.

As you know, ITT World Communications stands ready to serve such needs: and would welcome an inquiry should such instructions change. Thanks once again for your courtesy. Sincerely yours,

JOSEPH J. GANCIE,

Vice President.

COMMUNICATIONS SATELLITE CORP.,
Washington, D.C., April 5, 1966.

HOWARD J. AIBEL, Esq.,

Antitrust and Government Regulatory Counsel, International Telephone & Telegraph Corp., New York, N.Y.

DEAR MR. AIBEL: Please refer to your letter to me of March 25 concerning principally a letter from Mr. John T. Griffith of Comsat, to Mr. Rodriquez, Chairman, National Economic Council of the Philippines Government, dated February 28, 1966.

As you are no doubt aware, Mr. Griffith's letter was brought to my attention by Mr. Westfall after the last meeting of our board of directors, with the request that it also be brought to the attention of Mr. McCormack. As Mr. Westfall is

aware, Mr. McCormack was leaving on the weekend immediately following the Friday board meeting for Europe. Accordingly, it was not possible for Mr. McCormack to communicate with Mr. Westfall with reference to the letter prior to his departure. I have no doubt that he will talk with Mr. Westfall after his return, which we expect will be about April 11.

Your letter repeats at length a point of view which has been previously expressed with respect to the nature of our activities abroad, and continues to reflect a substantial misunderstanding on the part of ITT as to such activities. In view of the repeated explanation of the approach which has been taken by Comsat representatives abroad in encouraging satellite communication, I see no point in further discussion of this subject by letter.

Very truly yours,

ALLEN E. THROOP, Esq.,

ALLEN E. THROOP, Vice President and General Counsel.

INTERNATIONAL TELEPHONE & TELEGRAPH CORP.,
New York, N.Y., March 25, 1966.

Vice President and General Counsel,
Communications Satellite Corp.,
Washington, D.C.

DEAR MR. THROOP: It has appeared to us at ITT that Comsat has embarked upon a course designed to interfere with and disrupt long existing franchises and other advantageous relationships with foreign governments in many of the developing areas of the world pursuant to which ITT has and does offer to provide international telecommunications services to and from those lands. Further, since Comsat's conduct does not appear to be directed to the promotion of its own business, but rather, directed to the disruption of our business through promoting government ownership and operation of international telecommunications facilities in derogation of our existing franchises, the propriety of Comsat's action, to say the least, is obscure.

The impact of Comsat's activities has been greater than otherwise would have been the case if Comsat were a more conventional commercial enterprise. Since Comsat's representatives may call on foreign governments as an instrumentality of the Government of the United States in connection with participation by those foreign governments in Intelsat, Comsat's representatives appear to be cloaked with a special status. It has appeared to us that, at the very least, the limitation of the official mission of Comsat's representatives has not been made clear to many foreign governments, with the result that conversations which go beyond participation in the space segment consortium appear to be similarly suggestions of the U.S. Government. In such a context, discussion of the possibility of Government ownership of ground stations takes on special significance to a foreign government. We believe that Comsat has a special duty to avoid even the appearance that the U.S. Government or Comsat encourages Government ownership and in fact, should promote the ability of American-owned companies to continue to serve in those lands.

We have suggested that the interests of all would be served if in those instances where American-owned companies are franchised carriers serving the country, representatives of those companies were invited to participate in Comsat's meetings with the governments in those lands. Since this suggestion has been rejected, we have no direct knowledge of what has been said by Comsat's representatives at those meetings. However, we have received reports from time to time that suggestions have been made by Comsat's representatives which, in these circumstances, make it appear that Comsat actively promotes such government ownership in derogation of the existing carriers' position. For instance, we have been told that it has been suggested that AID funds or international bank financing might be available to fund a governmentally owned station, and that two governments were offered the use of transportable earth stations owned by Comsat for use prior to completion of construction of permanent facilities owned by the governments. As I said earlier, we have no direct knowledge of what was said; however, we do know from direct experience that the effect of Comsat's visits has been to delay us in our efforts to install ground stations.

Our protests and complaints have been met by your associates with vehement denials that they have in any way encouraged government ownership and opera

tion of international telecommunication facilities in preference to ownership by private entities. It was therefore with surprise and dismay that I read a copy of a letter recently forwarded to me which purports to be from Mr. John T. Griffith, Pacific-Asia supervisor, Communications Satellite Corp., which is addressed to Mr. Filesion Rodriquez, Chairman, National Economic Council, Republic of the Philippines, Manila. In his letter Mr. Griffith states the following:

"The [Comsat] team will have to reach an understanding with your entity— the Public Works and Communications Department-for the charges that will accrue from providing service commencing in 1967 to our customer, the U.S. Government, through a Philippine earth station using the Pacific Intelsat satellite. The understanding would cover revenues mutually agreed upon for the years 1967, 1968, and 1969 to the Philippine earth station for the level of channels which I described to you in our earlier conversations. This understanding will then be used in Comsat negotiations with our customer, the U.S. Government, for a contract for these * * * [illegible]. Subsequent to this contract execution, Comsat will execute a formal contract with your Philippine Government entity, preserving the features contained in our memorandum of understanding, which we hope to arrive at by March 5, 1966."

As noted in the excerpt set forth above, communications services sought by Comsat from the Philippine Government are to be provided to the U.S. Government. For your convenience, a copy of this letter which, unfortunately, is not entirely legible, is enclosed.

As perhaps you know, the Public Works and Communications Department of the Philippines is not, and has not been engaged in the providing of international telecommunications services to and from the Philippines. Such services are currently provided by an ITT company, by RCA communications, and by the Philippines Long Distance Telephone Co., a company affiliated with the General Telephone System. It therefore certainly is extraordinary that Comsat would be seeking a quotation from a Philippine Government entity not presently engaged in rendering such services in preference to the American companies currently providing such services.

I thought that you might like an opportunity to make some comment or explanation.

Very truly yours,

HOWARD J. AIBEL, Antitrust and Government, Regulatory Counsel.

(COPY)

Mr. FELISION RODRIQUEZ,

Chairman, National Economic Council,

Republic of the Philippines, Manila.

COMMUNICATIONS SATELLITE CORP.,
Manila, Philippines, February 28, 1966.

DEAR MR. CHAIRMAN: Preliminary to our meeting on Wednesday, March 2, 1966, I am forwarding the following information to you so that you may have background of what I plan to discuss. This will afford you time to seek answers, if required.

As a follow-on to your response to my request during our last meeting on Friday, February 21, 1966, the Comsat team from Washington will arrive in Manila on March 1, 1966. The team is composed as follows:

Mr. Lewis Meyer, treasurer, Comsat.

Dr. Hans Wiess, ground station engineer and Comsat technical representative.

Mr. George Lawler, manager, marketing, and operations representative.
Mr. William English, Comsat legal representative.

The team will have to reach an understanding with your entity—the Public Works and Communications Department-for the charges that will accrue from providing service commencing in 1967 to our customer, the U.S. Government, through a Philippine earth station using the Pacific Intelsat satellite. The understanding would cover revenues mutually agreed upon for the years 1967, 1968, and 1969 to the Philippine earth station for the level of channels which I described to you in our earlier conversations. This understanding will then be used in Comsat negotiations with our customer, the U.S. Government, for a contract for these [illegible]. Subsequent to this contract exe

cution, Comsat will execute a formal contract with your Philippine Government entity, preserving the features contained in our memorandum of understanding, which we hope to arrive at by March 5, 1966. You realize, of course, this must be done soon so that Comsat and the U.S. Government can commence the contract negotiations not later than April 1966.

It would be most helpful if your entity-the Department of Public Works and Communications-could have the necessary personnel available for meetings which should commence early on Wednesday, March 2, 1966. Details of a lease of the Comsat transportable station for 1967 are of importance also, if the Philippine Government intends to use this facility. Since the channels the U.S. Government desires in the Philippines must be distributed to the NCS-DCA [illegible] on Clark Air Force Base, [illegible] for such distribution must also be available.

I would appreciate your letting me know, as soon as possible, the time and place where our discussions will take place so that I may have our team ready to commence on schedule. We must be prepared to go to Bangkok, Thailand, early in the week of March 7, 1966. I may be reached in care of Mr. Dawson Wilson, U.S. Embassy, telephone 5-80-11, extension 396, or at room 254, Manila Hotel.

Sincerely,

Mr. JOSEPH J. GANCIE,

JOHN T. GRIFFITH,
Pacific-Asia Supervisor,
Communications Satellite Corp.

DEFENSE COMMUNICATIONS AGENCY,
Washington, D.C., September 6, 1966.

Vice President, ITT World Communications, Inc.,
Washington, D.C.

DEAR MR. GANCIE: I am in receipt of your letter of August 24 in which you request a copy of the CSA executed by DCA and Comsat for communications satellite service in the Pacific. You state as your reasons for the request the existence of the assignment clause in the CSA and the possibility of the FCC and Congress requesting from you an analysis of the conditions of the CSA.

As you are aware, the assignment clause existing in the CSA was a matter of discussion in the hearings held on August 15, 16, and 17 by the Military Operations Subcommittee of the Government Operations Committee of the House of Representatives. Its purpose and legality were testified to by the DCA witnesses. Accordingly, your conclusion that the clause "remains nebulous and apparently without reference to authority guidelines" does not appear supportable.

Your further conclusion that you are unable to respond to the FCC and to Congress as to whether you understand and accept the conditions of the CSA, is also noted. Since the Government is not at this time considering an assignment of the CSA, your concern as to whether you understand or accept the conditions of the CSA is premature. It would appear, therefore, that your response to the FCC and the Congress, should you be asked, would be to this effect. Further, it should be noted that the FCC and the Congress have a copy of the CSA and therefore are already aware of its terms and conditions.

For the above reasons, the public release of the CSA at this time would not appear to be justified.

Sincerely,

LEE M. PASCHALL,
Colonel, U.S. Air Force,

Chief, DCS Programs and Requirements.

INTERNATIONAL TELEPHONE & TELEGRAPH Corp.,

New York, N.Y., July 13, 1966.

Gen. JAMES D. O'CONNELL,

Director of Telecommunications Management,
Office of Telecommunications Management,
Washington, D.C.

DEAR GENERAL O'CONNELL: Over the course of the last week or so, several reports have appeared in the press that you had written to the Federal Communi

cations Commission urging that agency to reconsider its announced determination in the so-called "authorized user" proceeding. Because the reports have been so much at variance with the points and principles upon which it appeared that we reached mutual agreement during the conversation we had in your office on -June 22, with Harold Geneen, chairman and president of ITT, we had hoped that you would issue a statement to clarify what could only have been misquotation or misinterpretation of what you had written, or perhaps released the letter itself to clear up the matter. Since this has not happened and because this matter is of such pressing national importance, I believe it would be useful to set forth the points and principles we discussed. As I recall it these in summary were:

1. That the skills, facilities, experience, and overseas operating arrangements possessed by the public service international carriers are a national resource of great importance in peace, but especially in times of emergency; 2. That every effort should be made to integrate communication services via satellite with the existing systems and facilities so as to maintain the ability of those carriers to continue to serve not only governmental needs, but also those of the general public, at reasonable rates;

3. That the Government should not renege upon the implied commitment it made when the Department of Defense urged the necessity of a Pacific cable-a facility requiring an investment of more than $100 million made in large part to serve the defense needs of the United States-to continue to use that facility in the reasonably, foreseeable future; and

4. That if the Government maintained its existing cable leases and if the public service carriers were to provide the DCA requirements for new channels via satellite, those extra channels could be provided at no significant extra cost to the Government over Comsat's charge for the channels.

As a communications executive of long experience, you accepted without reservation the concept that it is impossible to maintain a communications system of 'different media if rates for the same services over the different media varied.

A composite rate averaging the differing costs of available facilities is the way in which communications entities the world over have passed on to users the benefits of new technology while at the same time protecting investments previously made in facilities needed to serve the public needs. For instance, you agreed that it would be an impossible situation if there were one rate for a telephone call from Washington, D.C., to Los Angeles if the call went over microwave, and another rate if it went via a coaxial cable.

Recognizing these facts, it is impossible to accept the proposition advanced by the Department of Defense to you that they can obtain lower cost communications facilities by doing business directly with Comsat. This ignores the fundamental principle that the total communications facilities must be supported by the total revenues.

This is the heart of the matter. The reasonableness of rates paid by the DCA for satellite channels must be considered in the larger context of rates for all services paid by all users; quite properly Congress has delegated the authority to determine the reasonableness of rates to the Federal Communications Commission, which over the 30 years of its existence has developed an expertise in resolving such issues in the overall public interest. Congress did not delegate that function to the Department of Defense.

In the course of our discussion you indicated that the Pacific cable had been established as early as it was, not because of the economics of commercial traffic but because the Government had urgent and substantial needs for highquality communications services in that area for the foreseeable future. We understood that you agreed that the Government should not renege on the understanding upon which that investment of the funds of over half a million U.S. stockholders was made. You indicated that you thought that it would be inappropriate for the Department of Defense to shift its communications usage from the cable to the satellite without being prepared to pay higher charges for such cable channels as it chose it retain. Indeed, all other users would inevitably pay more for such services as the burden of joint costs was thrown fully upon them. We expressed doubt that the recently announced rate reductions which will benefit users by over half a billion dollars could be held, were the Government to leave the cables.

It was in this context that we explained that ITT World Communications had been informed that the Defense Communications Agency intended to shift 50 percent of its current usage of the cable to the satellite. In such circum

« PreviousContinue »