5. STRATEGIC AIR COMMAND PRIMARY ALERTING SYSTEM (PAS) The PAS is a voice alerting network of 106 circuits radiating from Omaha, Nebr., to the numbered Air Force headquarters throughout the world. It is used to alert the Strategic Air Command's striking forces located at Strategic Air Command bases and missile complexes. The circuits are equipped with an assurance feature and use about 93,000 miles of circuitry. 6. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) NASA is furnished voice, teletypewriter, data, facsimile, and video services for both operational and administrative purposes. Included are communications used in support of manned space programs, launch activities, tracking networks as well as video and facsimile services used to support launch missions. There are some 680 services using more than 600,000 circuit miles. 7. FEDERAL AVIATION AGENCY (FAA) The FAA is furnished some 1,300 services using over 400,000 miles of circuits in a variety of complex arrangements. The FAA uses these services to perform their functions of coordinating, regulating, and controlling air traffic, collecting and disseminating weather information, as well as remote radar system used for information collection and their operational and administrative uses. EXHIBIT B Overseas Government private line circuits provided by the Bell System and its overseas correspondents EXHIBIT C.-EXTENT OF OVERSEAS UTILIZATION OF COMMERCIAL SATELLITE CIRCUITS Our forecasts of the number of commercial satellite circuits that will be required in 1970, 1975, and 1980 for overseas telephone service are shown in the attached statement. In preparing these forecasts, it was necessary to make certain assumptions regarding rate levels, standards of service, development of internal communications facilities in foreign countries, operating methods (including the introduction of customer dialing) and other factors that have not been reviewed with our foreign correspondents. Since their ideas and actions are likely to have a major bearing on the rate of growth of our overseas telephone business, our forecasts and the following statements should be viewed with these limitations in mind. Our objective is to furnish the best possible overseas service for the United States telephone customer. We intend to use whatever facility best meets this objective. It is our present feeling that there is a field of use for both satellite and cable circuits in our overseas operations. While technological improvements and other factors will certainly change the costs of both systems, it appears, as a broad generalization, that cables are to be preferred for the relatively short distances, such as between Florida and Puerto Rico, and satellites for the longer distances, such as for direct circuits from the United States Mainland to Japan and other points in the Far East, with a considerable mixture of the two at the intermediate distances, such as United States-Europe and Mainland-Hawaii. Also, when the problem of multiple access to the satellite system is solved, satellite circuits should have a distinct advantage in reaching distant countries which have relatively light circuit loads, such as some of the countries in Africa and Asia. The lack of regional communications facilities connecting these countries is a major factor in this conclusion. The following is our present view on satellite circuit utilization between the United States and various geographical areas of the world: 1. TRANSATLANTIC It is our plan to diversify Transatlantic facilities to intermix cable and satellite channels to obtain a reasonable balance. 2. TRANSPACIFIO In this area, we expect that an approximate balance will be obtained between cables and satellite channels, particularly in the U.S. Mainland-Hawaii cross section. 3. CARIBBEAN We anticipate that most of the requirements between the U.S. Mainland and the Caribbean area, including Central America will be supplied by submarine cables, tropospheric scatter systems or land lines. 4. SOUTH AMERICA We expect that satellite circuits will be used almost exclusively for service to southern South America until the mid-1970's, at which time it is assumed that cable systems will be available to these locations. 5. AFRICA With the exception of South Africa (which will be connected to Europe by cable) and those countries on the Mediterranean that are served by cable from Europe, we anticipate that satellite circuits will ultimately be used for most of the nations in Africa. The accuracy of the forecasts in this area is questionable due to the uncertainty of the progress of development of internal communications systems. 6. SOUTHEAST ASIA-INDIA-IRAN-ARABIA It is our opinion that satellites will provide the bulk of the service to this area from the United States. The extent of the development of internal communications and general economy of these countries and the communities of interest between the United States and these areas will have a major effect on future requirements. In conclusion, we wish to emphasize again that these forecasts report only our views which will be materially affected by future developments in the cost and reliability of the various types of facilties and the internal development and policies of our foreign correspondents. Forecast of oversea satellite circuit requirements for telephone service, U.S. mainland to ITU zones Mr. HOLIFIELD. Thank you, Mr. Duncan, for your presentation. The exhibits you have appended to your statement have been included in the formal record at this point. Mr. Roback? A.T. & T. INTEREST IN COMSAT Mr. ROBACK. Mr. Duncan, you say you have a substantial interest in Comsat, which is a usual shorthand term for the corporation. What is your interest now? Mr. DUNCAN. Our interest is $58 million. Mr. ROBACK. $58 million. How many shares of stock is that? Mr. DUNCAN. Well, if you divided that by $20 a share Mr. ROBACK. $58 million is your original acquisition value. Mr. DUNCAN. That is right. Mr. ROBACK. What is it worth on the market today? Mr. DUNCAN. I do not know the present-day value of Comsat, but it is quite a bit higher. Mr. ROBACK. At least double or more. Mr. DUNCAN. Yes. Mr. ROBACK. SO, you have at least a paper profit greatly in excess of your investment. Mr. DUNCAN. Yes. Mr. ROBACK. You made at least $58 million. Mr. DUNCAN. That is right. A.T. & T. DIRECTORS ON COMSAT BOARD Mr. ROBACK. How many directors do you have? Mr. DUNCAN. There are three directors of our company on Comsat. Mr. ROBACK. Do these directors it on the board and vote on most issues? Mr. DUNCAN. They sit on the board, of course, and they vote on the issues where there is no conflict of interest. Mr. ROBACK. Well, is there any issue of any significance that would not involve your company in an interest relationship-using the word not invidiously, but because you are a big corporation and you have business overseas and in the United States? What is the practical effect of that situation? Do you, for example, in most matters affecting the business of the use of satellites, future competitive potentials, abstain? Do your directors actually abstain? And should the decisions be made only by the public directors, using the word "public" in the sense of representing the numerous stockholders and the Government of the United States? Mr. DUNCAN. I am not sure I entirely understand your question. Of course, many of the Mr. ROBACK. What I want to know is this: We have had testimony that the board of directors approved various decisions. For example, approval of certain rates to the Government that Comsat quoted, and certain rates to the carriers, and one thing and another. Is the board, as it is presently constituted, a functioning board or do the industry members, in effect, usually abstain? Mr. DUNCAN. No; I think it is a functioning board. The impression I have is that it definitely is a functioning board, and the industry members are contributing to it, being a functioning board. I do not know there are occasions when they do leave the board room where there is some question, some possible question, of whether there might be a conflict. I know of no cases where our people have obtained any competitive advantage that I know of through their membership on the board. Mr. ROBACK. Well, in docket No. 15735, which was the FCC docket having to do with the initial earth station ownership, the point was made by the FCC that the carriers have 50 percent of the stock ownership and elect 40 percent of the directors, and for these reasons have an effective means of presenting their views on all important facets of satellite communications. Is that the case as you understand it? In other words, do you agree with the FCC observation or comment in their report and order in docket 15735? Mr. DUNCAN. I am not familiar with that particular order. Mr. DUNCAN. In a general sense, I do not think we have any dif ficulty in presenting our views to the Comsat people, either through our membership on the board or through direct contacts with Comsat. Mr. ROBACK. Do you think it is an effective functioning organization, and your company is well represented; is that right? Mr. DUNCAN. Yes. LARGE CAPACITY CABLE DEVELOPMENT Mr. ROBACK. You referred in your statement to development work on cables with a capacity up to 2,300 circuits. What is the development span; do you have any guess? Mr. DUNCAN. We would expect that these particular cables would be required and would be available for service in about the mid-1970's. Mr. ROBACK. Mid-1970's. So, by that time, presumably, you would have extensive satellite circuitry? Mr. DUNCAN. Yes; that is right. Mr. ROBACK. Would you anticipate, if such development work is successful, that you will have extensive new cable circuits? Mr. DUNCAN. Yes, I would expect that we would, particularly in the heavy cross sections. Mr. ROBACK. You anticipate the possibility that because the development of satellite communications, by a Federal statute, is to be promoted, that the FCC might bar the future use of cables? Suppose cables are, in future development, serious competition. Do you anticipate that the FCC would decide that you should not have cables, because they have a mandate under the Satellite Act to promote satellite communications? Mr. DUNCAN. I do not expect that we would have any prohibition against developing cables. Of course, each individual case would have to be considered on its own merits by the FCC, if there was a conflict. Mr. ROBACK. As far as A.T. & T. is concerned, you see a promising future for cables, you are continuing your work on cables, and you expect sometime within the next 10 years to have new cables with greatly increased circuitry; is that right? Mr. DUNCAN. We expect to have additional cables, and we also expect to have a lot of satellite circuits. EFFECT OF TAT-4 DECISION Mr. ROBACK. Now, you mentioned, on page 4 of your statement, that your use of satellite circuitry is somewhat limited because of the FCC decision which bars your offering voice-data service to overseas points. Will you amplify that a little? For example, in exhibit B, you show that you have private-line circuits, voice-data circuits to Europe. Is that limited to existing cables and not applicable to the future ones? Mr. DUNCAN. The ones that we show as voice data through privateline circuits to Europe and to other places, with the exception of Hawaii, were the ones that were included under the grandfather clause at the time of the decision which prohibited our future use. Mr. ROBACK. Which decision is that? Mr. DUNCAN. That was the Transatlantic 4 decision. Mr. ROBACK. The TAT-4 decision? Mr. DUNCAN. That is right. Mr. ROBACK. This is all business under the grandfather clause. Mr. DUNCAN. That is right; with the exception of Hawaii, and Hawaii was not included in that decision. Mr. ROBACK. If you did not have that limitation, would you be using more Early Bird circuits? Mr. DUNCAN. I do not think so. |