Mr. HOLIFIELD. These hearings this morning will conclude our public hearings as far as the Chair knows. However, we will keep the record open for the submission of documents and for additions to the testimony which has been given, and, therefore, rather than to adjourn permanently the hearings, we will adjourn subject to possible call of the Chair for additional information. Gentlemen, we wish to thank you this morning for your testimony. It has been very responsive and very clear, and it will be of value to the committee. Mr. STRASSBURG. Thank you, Mr. Chairman. May I say thank you for the cooperation and assistance we have gotten from your staff in making available to us copies of transcripts and other such matters that have helped us prepare for this meeting. Mr. HOLIFIELD. Well, that is fine. Mr. STRASSBURG. I appreciate it very much. Mr. HOLIFIELD. The Chair is always glad to hear that the staff is conducting itself in an orderly way. Mr. STRASSBURG. In an orderly and very thorough way. Mr. HOLIFIELD. The meeting is adjourned. (The following additional statements for the record were received by the subcommittee:) HAWAIIAN TELEPHONE Co., Honolulu, Hawaii, September 1, 1966. Hon. CHET HOLIFIELD, Chairman, Military Operations Subcommittee of the Committee on Government Operations, Rayburn House Office Building, Washington, D.C. DEAR MR. CHAIRMAN: I have your letter of August 19, 1966, extending an invitation to appear at a hearing before the Subcommittee on Military Operations. I regret that it will not be feasible for a representative of Hawaiian Telephone Co. to appear, but in an attempt to be as helpful to your subcommittee as possible under the circumstances, I am submitting the following answers to the specific questions set forth in Mr. Roback's memorandum of August 11, 1966. 1. Hawaiian Telephone Co. ("Hawaiian") is the only land-line telephone company which operates in the State of Hawaii. It is a corporation organized under the laws of the Kingdom of Hawaii, and now existing under the laws of the State of Hawaii. The company and its predecessors have provided communications services to the people of Hawaii for 83 years. It is an independent company with approximately 28,000 stockholders. At the present time, Hawaiian provides communications services on and between the six populated islands comprising the Hawaiian group. By means of the various underseas communications cables which have been landed in Hawaii, it engages in communications services to all parts of the world reached by the U.S. communications companies. Hawaiian provides similar communications services to the people of Hawaii as are furnished by the landline telephone companies in the continental United States. Hawaiian's direct overseas operations include communications services to and from mainland United States, Midway, Wake, Guam, Japan, and the Philippines via underseas cables in which Hawaiian owns an interest. In addition, Hawaiian leases circuits in the Commonwealth-Pacific (Compac) cable between Hawaii and Canada for use in providing service to mainland United States, and Hawaiian is authorized to provide communications services directly to Australia, New Zealand, and Fiji via the Compac cable between Hawaii and Australia. 2. The departments and agencies of the U.S. Government are large and important subscribers for all communications services offered by Hawaiian. As set forth in Hawaiian's comments in the authorized user proceeding before the Federal Communications Commission, copies of which are attached hereto as a partial answer to question No. 4. U.S. Government business is the most significant segment of Hawaiian's overseas business. In the "authorized user" decision (memorandum opinion and statement of policy, docket 16058, released July 21, 1966), the FCC correctly notes that Hawaiian's total overseas revenues in 1965 were $14,280,000, total leased circuit revenues 4,741,000, and U.S. Government leased circuit revenues $4,606,000. At this point he Commission notes: "For each carrier, revenues from services to the Government are essential to a air rate of return and provide a sizable part of its total profit margin. Thus the oss of a substantial proportion of Government leased circuit revenues could have serious adverse effect upon the carriers. Instead of being able to reduce rates to reflect the lower costs of satellite circuits, they would probably have to seek substantial rate increases." (Par. 32.) "The importance of U.S. Government business to Hawaiian cannot be overemphasized. Hawaiian has invested about $30 million in cable facilities in the Pacific. It did this under the well-founded expectation that there would be Substantial usage by the Government of these facilities. (See for example A.T. & T.'s application, file No. P-C-4814.) About 28 percent of Hawaiian's total revenues are now derived from overseas communications. Particularly in the cables west of Hawaii where commercial business is comparatively light, U.S. Government business is essential. Without such business the cables which are of vital importance to the national defense and national welfare, would not remain economically feasible. The Japan cable was routed via Midway and Wake rather than directly from Hawaii to Guam because of military requirements. Approximately 70 percent of Hawaiian's cable revenues for communications between Hawaii and Midway, Wake, Guam, Japan, and the Philippines are from such government private line services. Approximately 20 percent of Hawaiian's cable revenues for communications between Hawaii and continental United States are also from U.S. Government private line services." (Hawaiian's initial comments, filed November 1, 1965, p. 5.) 3. At the present time Hawaiian is not using satellite channels as none are available. As soon as they become available through the Hawaii satellite earth station now under construction, Hawaiian expects to use such facilities for providing overseas communications services. Recently, Hawaiian and the American Telephone & Telegraph Co., filed a joint application with the Federal Communications Commission to acquire and operate a total of 50 voice satellite channels between Hawaii and the mainland. This application sets forth that Hawaiian and A.T. & T. expect to acquire 25 channels as soon as they become available-about December 1966 and to increase the number to 50 by the middle of 1967. Hawaiian also expects to file with the Federal Communications Commission in the immediate future, an application to lease up to 30 satellite circuits for use between Hawaii and the Philippines, Japan, and Thailand to provide all or portions of certain communications requirements of the Defense Communications Agency for service to the Pacific. Hawaiian has advised the Federal Communications Commission that it will file substantially lower composite cable-satellite rates for its overseas services to be effective as soon as satellite circuits become available. The filing of these rates is conditioned on the Federal Communications Commission's authorized user decision remaining fully effective. In this way Hawaiian expects to pass on to the U.S. Government and the public the benefits of the indicated lower costs of satellite channels and to retain for their benefit the protection accorded by cable channels. 4. Hawaiian is a stockholder of the Communications Satellite Corp. It owns 50,000 shares of series II common stock; i.e., stock issued only to communications common carriers in accordance with an authorization of the Federal Communications Commission. D. S. Guild, president of Hawaiian, has served as one of six directors elected by the owners of series II common stock. Hawaiian, as pointed out above, expects to acquire satellite channels from Comsat and to use them in providing communications services to the public. It expects to lease additional satellite channels from Comsat in the future as its requirements increase, subject to receiving the necessary authorization from the Federal Communications Commission. Hawaiian has been authorized and has already constructed in part the terrestrial facilities to connect all common carrier communications systems located in Hawaii (including overseas cable terminals) with the earth station which is being built at Paumalu, Oahu. Hawaiian's position regarding the Federal Government as an authorized user of services of the Communications Satellite Corp. is set forth in the attached initial and reply comments filed by Hawaiian in FCC docket No. 16058. Although Hawaiian's position is different in certain respects from the decision of the Federal Communications Commission in its authorized user proceeding, Hawaiian did not seek reconsideration of the Commission's decision in that proceeding released July 21, 1966. 5. After a careful review of the Federal Communications Commission's decision in the authorized user proceeding Hawaiian believes that this decision is a sound one and adequately and fairly recognizes the interests of all parties involved, including the public, the U.S. Government and the departments and agencies thereof, the Communications Satellite Corp., and the U.S. overseas carriers. Hawaiian doesn't believe that it would be in the public interest to enact new legislation which would permit the merger of overseas telephone companies with overseas record companies. Very truly yours, DOUGLAS S. GUILD. (COMMITTEE NOTE.-The reply comments and brief referred to in the letter above are retained in committee files. The initial comments above referred to follow :) BEFORE THE FEDERAL COMMUNICATIONS COMMISSION In the matter of authorized entities and authorized users under the Communications Satellite Act of 1962 Docket No. 16058 COMMENTS OF HAWAIIAN TELEPHONE CO. Hawaiian Telephone Co. ("Hawaiian") submits the following responses to the specific questions set forth in the Commission's notice of inquiry released June 16, 1965. The questions have been grouped in three sections, and, for convenience, the questions commented on in each section are quoted at the beginning thereof. I "(a) The extent to which, as a matter of law, persons and entities in the United States, other than communications common carriers, can be authorized to obtain telecommunications channels or services directly from the corporation (parties submitting comments on this question should do so in separate legal briefs);" As a matter of law, the only person and entity in the United States, other than communications common carirers, which can be authorized to obtain telecommunications channels or services directly from Communications Satellite Corp. ("Comsat") is the U.S. Government. A separate legal brief supporting this conclusion is attached. This brief also shows that under the Communications Satellite Act of 1962 ("Satellite Act") the power to authorize the Government to become an authorized user has been accorded the President, but that the Satellite Act also intends that the use of the satellite system by the Government is to be limited and in no event is the service offering of Comsat to accord any rate or service advantage to the Government. II "(b) The extent to which, as a matter of policy, such persons or entities should be authorized to obtain channels or services directly from the corporation; "(c) The nature and scope of services that can and should be furnished and the types of persons or entities who can and should be deemed eligible to obtain such services;" Hawaiian's comments on these two questions, which are interrelated, are presented below under three subheadings: "Communications Common Carriers,” "U.S. Government," and "Other Entities." (1) Comunications common carriers The Satellite Act and its legislative history make it abundantly clear that the primary function of Comsat is to furnish communications channels for hire to U.S. communications common carriers. An "authorized carrier" is defined in section 103 (7) as a communications common carrier which has been authorized by the Commission under the Communications Act of 1934, as amended ("Communications Act") to provide services by means of communications satellites. Any carrier which has been authorized by the Commission can obtain channels directly from Comsat and use them in providing authorized services to the public. It is also the intent of the Satellite Act that the communications common carriers be permitted to provide via satellites their regular services and such other services as the Commission may authorize. Hawaiian is a progressive independent telephone company which has satisfactorily fulfilled the communications needs of its customers in Hawaii for many years and will continue to do so. Hawaiian is in a better position to anticipate and to fulfill the communications needs of the public in Hawaii than Comsat or others, because of Hawaian's extensive experience in providing local communications services in the area and in providing overseas communications services originating or terminating in the area. Hawaiian cannot conceive of a situation where Comsat would be willing or able to furnish a service via satellites in Hawaii that Hawaiian would not be willing and able to furnish via satellite or cable. Consequently, there will be no occasion for Comsat to provide services directly to any noncarrier entity in Hawaii. (2) U.S. Government In the attached legal brief Hawaiian shows that the Satellite Act contemplates that Comsat is to be primarily a carrier's carrier and that any service it may furnish the U.S. Government should be limited and should be on such terms and conditions as to comply with section 201 (c) (2) of the Satellite Act. Under these circumstances, it would seem unlikely that the President should exercise the authority accorded him in section 201(a)(6) of the Satellite Act to take steps for the Government to utilize the satellite system as the lessee of facilities from Comsat. In any event only military necessity or a showing of nonavailability of service by the carriers would appear to be a reasonable basis for the Government to become a lessee of facilities from Comsat. Hawaiian believes the Satellite Act intends that the carriers will continue to provide all, or substantially all, services to the U.S. Government. The importance of U.S. Government business to Hawaiian cannot be overemphasized. Hawaiian has invested about $30 million in cable facilities in the Pacific. It did this under the well-founded expectation that there would be substantial usage by the Government of these facilities. (See for example A.T. & T.'s application, file No. P-C-4814.) About 28 percent of Hawaiian's total revenues are now derived from overseas communications. Particularly in the cables west of Hawaii where commercial business is comparatively light, U.S. Government business is essential. Without such business the cables, which are of vital importance to the national defense and national welfare, would not remain economically feasible. The Japan cable was routed via Midway and Wake rather than directly from Hawaii to Guam because of military requirements. Approximately 70 percent of Hawaiian's cable revenues for communications between Hawaii and Midway, Wake, Guam, Japan, and the Philippines are from such Government private line services. Approximately 20 percent of Hawaiian's cable revenues for communications between Hawaii and continental United States are also from U.S. Government private line services. (3) Other entities Hawaiian's position is that entities in the United States other than the U.S. Government and communications common carriers cannot qualify as authorized users as a matter of law (see brief attached.) III "(d) The nature and extent of the authorization required in order for any such person or entity to obtain channels or services directly from the corporation; "(e) The policies and procedures which the Commission should establish to govern the issuance of any such authorizations and the showing to be made in support thereof, with due regard for the operational, economic and other public interest considerations involved.” Section 103 (7) of the Satellite Act, as already noted, defines an "authorized carrier" as one authorized under the Communications Act to provide service by means of communications satellites. Titles II and III of that act are specifically made applicable to Comsat by section 401 of the Satellite Act. The Communications Act, by its own term (sec. 2(a)), is applicable to any common carrier engaged in the United States in interstate or foreign communications. Section 214 is the section of the Communications Act under which the Commission is empowered to authorize carriers to provide service by means of com munications satellites. The "carrier," i.e., the person or entity which furnishes interstate or foreign communications channels for hire or service by means of such facilities must obtain the requisite approval under section 214. The Satellite Act does not purport to change this requirement. Further, it is submitted that Comsat's corporate power under section 305 of the Satellite Act to "furnish, for hire, channels of communications to U.S. communications common carriers and other authorized entites * * *," does not automatically accord Comsat, as a "carrier" under the Communications Act, certificate authority under section 214. Insofar as the carriers are concerned, no changes appear necessary or desirable in the present procedures or showings required under section 214, except a showing with respect to the availability of satellite facilities. Comsat as an applicant to provide services to the Government would, of course, be required to show that the Government has been authorized for the service involved and that the conditions of any such service are not in conflict with subsection 201 (c) (2) and in accord with the purposes of the Satellite Act. Respectfully submitted. NOVEMBER 1, 1965. UMAR L. CROOK, Its Attorney. CONGRESS OF THE UNITED STATES, Mr. JOSEPH P. SELLY, HOUSE OF REPRESENTATIVES, Washington, D.C., September 13, 1966. President, American Communications Association, DEAR MR. SELLY: This will acknowledge receipt of your letter of September 12, 1966, conveying the position of the American Communications Association relative to Government use of satellite communications. Your letter will be brought to the attention of the subcommittee members, entered into the record, and made a part of the published hearings of the subcommittee. Sincerely yours, HERBERT ROBACK, Staff Administrator. AMERICAN COMMUNICATIONS ASSOCIATION. HERBERT ROBACK, Staff Administrator, Military Operations Subcommittee, Committee on Government Operations, House of Representatives, Washington, D.C. DEAR MR. ROBACK: I appreciate this opportunity to convey to the committee the position of American Communications Association in regard to your current investigation into the Government use of satellite communications and would request that the letter be made part of the record of the hearings. Our interest stems from the fact that our union holds contracts with RCA Communications, Western Union International and French Cable, which between them employ approximately two-thirds of all employees in the international telegraph industry. It is our contention that to permit the Defense Department or any other noncarrier to lease circuits directly from Comsat, except under unique or exceptional circumstances, or where the national interest requires it, would seriously jeopardize the viability of the international telegraph carriers and would therefore threaten the job security, wages, hours, working conditions, and pension equities of the employees we represent. The Federal Communications Commission, in docket No. 16058, found that the loss of revenues from leased circuits to Comsat, if Comsat were permitted to lease directly to noncarriers, would threaten the viability of the carriers. It would be superfluous for us to repeat the evidence presented by the Commission in its order, but we feel that the Commission's presentation is factual and unassailable. We therefore limit our argument to the adverse effect on the workers in the industry of any decision which would in effect give Government sanction to the creation of a complete monopoly in the international telegraph industry. The number of workers eligible for union membership in the international telegraph companies is approximately 4,000, of which number American Com |