However, to get to some of them, very long waits are involved, and the transmission by high frequency may be quite unreliable. So your quality of service, your time required to get service, and the cost of the provision of that service is unacceptable to you. DIFFERENCES IN DDTM AND FCC POLICY Mr. DAHLIN. What do you understand to be the difference between your policy or desires with respect to, say, the cost and contract arrangements for the Pacific circuits, and what the FCC is trying to do in that area with its policies? Is the FCC's position tied up in the combination rate idea? Mr. O'CONNELL. The general philosophy that has been used over the years has to do with spreading the cost and spreading the rate structure over the complete gamut or spectrum of the facilities available. If you have high-frequency systems and cable systems as well as satellite systems, you would average out the costs of all of them, and establish a tariff which is based on the average costs of the total assemblage of facilities. The general purpose of this is so that you don't have large special use groups which would get preferred costs over what the individual user gets. Thus you spread all cost benefits over the complete range of users, e.g., Government users, business users and private individual users in their homes. This is the general philosophy that the Commission has used, as I understand it. Mr. DAHLIN. Do you believe this is less advantageous to the Government than the kind of arrangements you envisage in dealing with Comsat? Is that clear from your statement? Mr. O'CONNELL. Well, I would say that is as far as we go on the Comsat situation. That is that in establishing a new service in the satellite field there are advantages to going to Comsat for the furnishing of the pioneering service. AUTHORIZED USER POLICY Mr. DICKINSON. Mr. O'Connell, I am sure that I will be here tomorrow and I wanted to ask a couple of questions on another subject that I mentioned earlier. If you don't mind, let's revert back to that. We were talking about authorized users and whether the United States itself as an entity is an authorized user? There seems to be some conflict, at least in my mind, in this field. Now, the Communications Satellite Act, Public Law 87-624 provides that the corporation shall be considered a common carrier and subject to titles I and II of the Communications Act of 1934. It also says, and states outright that the United States is an authorized user. Now, so far as you are concerned, that is really all you need to know, isn't it? That, just like it says, the United States is an authorized user, no qualifications? But if you get back to the act of 1934, it seems that it comes under the FCC, and then the FCC also determines whether or not the United States is an authorized user or under what circumstances, because they qualify this-the FCC does. They have issued, if I understand it cor rectly, issued two different norms or criteria from which you determine when the United States may be a user. Once they used the word "unique," and then they used something else besides "unique." Mr. O'CONNELL. "In the national interest." Mr. DICKINSON. "Vital to the national security," I think, or "unique and exceptional" or "unique and"-what was the phrase? Mr. O'CONNELL. In the first one it was "unique and exceptional." Now, in order for the FCC to approve the United States as a user, it must then determine that these facts exist, if I understand it correctly, because they must approve the rate even though that doesn't bother you. Mr. O'CONNELL. No. Mr. DICKINSON. But they have that responsibility? Mr. O'CONNELL. That is correct. Mr. DICKINSON. So they put this qualifying or limiting feature to it, to determine uniqueness and whatever else they deem appropriate. Now, this is a conflict, isn't it? Does this interfere with you in your office or in making any decisions that you make? Do you have to look to the Mr. O'CONNELL. Well, it really hasn't been brought to the stage of determining just what the procedure is going to be yet. We won't really know what the Commission means, explicitly, by that until we go through a filing, an approval, and a statement from my office, et cetera. Mr. DICKINSON. From where you sit, would you feel that any time, say, the DOD requested channels where there are not now cables it would automatically become unique and exceptional, or unique and vital to the national interests, if DOD wants them and there are no cables run? Mr. O'CONNELL. Well, that is a good question. I hadn't thought about that particular point, but I would say "Yes," in response to your question. Mr. DICKINSON. Ipso facto Mr. O'CONNELL. If there are no other means of communication available, or if the high-frequency means is not considered satisfactory and they wanted reliability for other reasons, it is necessary to go by satellite. That would be a satisfactory rationale for Mr. DICKINSON. Or, if existing cable circuits were utilized to the full extent, and there were no vacant circuits available, that, too, would make it unique and in the national interest? Mr. O'CONNELL. Yes, sir; it would so seem. Mr. DICKINSON. And automatically just deal directly with Comsat without having to go through the common carriers that we would normally expect them to. And any time that, even though cables could be laid, the Department of Defense determined for itself that time was of the essence, and there is a satellite there that may be utilized and it takes so long to lay cables, then there, again, they can, in effect, force a preclusion of all common carriers and, by writing the requirements so that time is of the essence, force us once again to open the doors so that direct contract with Comsat would be carried out. Would that be feasible? Mr. O'CONNELL. I think perhaps we missed a point here, because the established carriers also use the satellite; they also have access to it. Mr. DICKINSON. Yes. Mr. O'CONNELL. So it isn't really a question of there being no cables available. It is a question as to whether the established carriers could furnish the service as satisfactorily as Comsat, the view of the cus tomer. Mr. DICKINSON. But you said earlier that it wasn't so much the question of who could furnish the same service. When you got together to determine this matter of policy, it got down to a question of finance, for the most part. Mr. O'CONNELL. This was because, in this particular and peculiar case, the tariffs had not been updated to crank into them the savings that could potentially be effected by the use of the satellite. We also did not know what additional charges would be involved by going through another agency. That is, another carrier, one of the record carriers, as compared to what it would be if we were to go directly to Comsat. Mr. DICKINSON. Direct to Comsat? Mr. O'CONNELL. These were the cost issues and questions that appeared, and the uncertainties that bothered us in trying to reach`s decision. Mr. DICKINSON. Well, now, you said that the initial decision to use a satellite on these 30 circuits was reached by the JCS. Mr. O'CONNELL. I don't know that, sir. Mr. DICKINSON. I wrote it down and I thought that is what you said. Mr. O'CONNELL. I think they said that they wanted to use the satellite, but—————— Mr. DICKINSON. Yes. Mr. O'CONNELL (continuing). But not necessarily to contract directly with Comsat for it. Mr. DICKINSON. I understand. But they said they wanted to use the satellite. Mr. O'CONNELL. I think that is right. I haven't seen the JCS instruction. Mr. DICKINSON. That is your recollection, anyway? Mr. O'CONNELL. That is my recollection. Mr. DICKINSON. And then you said the group of all who were affected-NASA, DOD, GSA, your office, and possibly others got together and determined how best to use the satellite, and that cost was the limiting factor when you arrived at your policy for whatever you did: you excluded others primarily because of costs. Mr. O'CONNELL. I didn't say that. I didn't intend to say it quite that way. Mr. DICKINSON. Maybe I am paraphrasing you awkwardly. Mr. O'CONNELL. What I intended to say was that we reached a point in our discussions when we couldn't go further in endeavoring to determine a policy, because we didn't know what the differentials in cost were going to be. It was speculated that they could be quite large. Mr. DICKINSON. At this time you decided to put out bids? Mr. O'CONNELL. The Defense Department did get proposals from all of the Mr. DICKINSON. From all of the common carriers? Mr. DICKINSON. After you had already requested, or the DOD had requested, rates from Comsat before this! Mr. O'CONNELL. I think not, sir. They had not actually gone out to conclude a contract or negotiate a contract. Mr. DICKINSON. It was our understanding, or mine at least, that they had been negotiating with Comsat since December. Mr. O'CONNELL. They had been discussing it with Comsat. Mr. DICKINSON. What is the difference now? They had been talking to them since December to give them a price, and they had been working on coming up with a price. Then, all of a sudden, they throw open the door and say, "All right, you public carriers give us a bid, too"; but they limited them, in the time that they had to give the bid, very narrowly compared to the time they had been talking with Comsat. Mr. O'CONNELL. This is right. Mr. DICKINSON. And after they got the bid Comsat was low and then they gave them an opportunity to bid further and Comsat did in fact lower its bid then, but even at that Comsat still had to furnish prices to everybody else who wanted to bid. Mr. O'CONNELL. This is right. Now Mr. DICKINSON. Well, now, my Mr. O'CONNELL. These earlier discussions, as I understand it, were discussions of technical feasibilities, discussions of the time that would be required to upgrade the Japanese earth station from its limited capacity to an adequate capacity to handle this traffic-the time that would be required for the Philippines to construct an earth station, when they could have it in service, and the time required for Thailand to construct an earth station. Mr. DICKINSON. What you are saying is that during all this time they were not negotiating just money, they were negotiating the technical aspects of it. Mr. O'CONNELL. They were also discussing whether the Thais and the Philippines would join the consortium. In the process of all this discussion and deliberating on estimates of the time factor and so on, each of these nations did, in fact, join the international consortium. Mr. DICKINSON. Well, now, does this indicate to you or may we draw an inference from this that we have evolved to a point where there is a policy enunciated now as to the use of Comsat by dealing directly with the Government, either through your office or DOD, that in the future in all probability they will deal directly with Comsat? Mr. O'CONNELL. No, sir, we have not established such a policy. Mr. DICKINSON. Would you think that would be an illogical reference to deduce from what we have seen so far? Mr. O'CONNELL. Well, I think that before establishing such a policy we would like to work this out further with the FCC, and see what action the FCC would take on the request for reconsideration. Mr. DICKINSON. You think we had better get a better definition from the FCC as to what they mean? Mr. O'CONNELL. I think it would be very helpful, sir. Mr. DICKINSON. I think it would, too. On page 68 of your testimony you conclude with the words: "The establishment of policy under which the Government procures service directly from Comsat is an executive branch responsibility." I wonder if you could elaborate just a bit on that. ...It runs over on page 69. Mr. O'CONNELL. Yes, we have felt that the act does, in fact, give the Federal Government the right and authority to determine the conditions under which it will go to Cosmat or go to any other carrier instead of Comsat. Mr. DICKINSON. Are you presupposing then, or does your statement mean when you say executive branch, you are talking about the FCC? Mr. O'CONNELL. No. We are talking about the executive branch of the Government which does not in this definition include the FCC. Mr. DAHLIN. So, if your choice in that case is based on price as against rates; that is, a competitive idea as compared to established rates, that policy would be determined by your office or by another agency at the direction of your office, rather than by the FCC? Mr. O'CONNELL. Not as far as rates are concerned. Mr. DAHLIN. How do you make a decision as to whether to go commercial, with one company or another, or within the Government, unhave the costs attached? less you Mr. O'CONNELL. Normally, by established tariff. Mr. DAHLIN. If you have a competition, as in the Pacific case you take it out of tariffs. Mr. O'CONNELL. There was no tariff which considered and reflected reduced costs of satellite communications. In this case what really caused the problem to arise, was that there was no tariff established which included the reduced cost of satellite communications. If there had been, it would not have been necessary to go to the various carriers for their proposals. Mr. DAHLIN. When you say "included the reduced costs," do you mean a tariff rate that was acceptable? Mr. O'CONNELL. We might still have gone out Mr. DAHLIN. You might decide that the tariff rate was too high? Mr. O'CONNELL. If the decision had been that the tariff was too high, our proper course of action would have been to appeal to the FCC or to request a recomputation of the tariff or the establishment of a new tariff. The Department of Defense did this about 2 years ago with reference to the cable tariffs, but there was no modification in those tariffs. Mr. DAHLIN. But from what you have just said to Mr. Dickinson, if you don't like the tariff price you can always go out on a competi tion and deal directly? This is not clear. Mr. O'CONNELL. No, I didn't say that. We feel that we are required to use the tariff rates established by the Commission. This is the properly constituted body to establish tariffs for the common carriers. and we don't question that in any way. |