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Mr. Duncan. You are referring to my exhibit, “C” I believe.
Mr. DAHLIN. Yes.

Mr. DUNCAN. We discussed here in some detail in exhibit C the requirements for satellite circuits, and other types of facilities will vary, the use of them will vary, depending on many factors, and I think you are referring to the transatlantic item there.

Mr. DAHLIN. Yes.

Mr. DUNCAN. Where we use the term, our plan is to diversify transatlantic facilities, to intermix cable and satellite channels, to obtain a reasonable balance.

Mr. DAHLIN. The same in the Pacific?

Mr. Dux An. Approximate balance is the term I used in the Pacific. In general, we think that in those areas, particularly in the transatlantic, it will be about 50–50. But these are composites of what we believe will happen country by country, and there are many factors involved in this. We have attempted to outline some of those factors in this exhibit.

Mr. Dahlin. With respect to the last page of your exhibits, the forecast, you have a large jump in demand predicted between 1975 and 1980. Is that mainly on the basis that you will have availability of both cable and satellite circuits in numbers never heard of before: 1975 is the breakthrough?

Mr. DUNCAN. Actually, the percentage jump is smaller. We anticipate that with increased, better facilities, and increased availability of internal facilities in various countries throughout the world, that we will continue to have a rapid growth in our overall overseas requirements, and, of course, these figures, if you will notice, the increase in satellite circuits between 1970 and 1975 go up at a higher percentage rate than they do between 1975 and 1980, and that merely reflects possibly a little bit of conservativeness on my part in the growth rate that we may get as we reach saturation points at various places in the world.

We think that there is a tremendous field for expansion and that this field will develop as the business in the countries, and the internal communications facilities in the countries improve and as rates come down.

Mr. DAHLIN. That is all.

Mr. HOLIFIELD. Thank you, Mr. Duncan and Mr. Ashley, for your testimony this morning.

Mr. DUNCAN. Thank you.
Mr. HOLIFIELD. You are excused.

The next witness will be Mr. Howard Hawkins, president of RCA Communications, Inc.

Mr. Hawkins, will you please introduce your associates for the record!

Mr. HAWKINS. Mr. Chairman, on my left is Edwin W. Peterson, who is our vice president and controller, and on my right is Leonard W. Tuft, vice president and general attorney.

Mr. HOLIFIELD. You may proceed with your statement, Mr. Hawkins.

Mr. HAWKINS. Thank you, Mr. Chairman.

STATEMENT OF HOWARD R. HAWKINS, PRESIDENT, RCA COMMU

NICATIONS, INC.; ACCOMPANIED BY EDWIN W. PETERSON, VICE PRESIDENT AND CONTROLLER; AND LEONARD W. TUFT, VICE PRESIDENT AND GENERAL ATTORNEY

Mr. HAWKINS. Mr. Chairman and members of the subcommittee, my name is Howard R. Hawkins. I am president of RCA Communications, Inc. I appreciate this opportunity to appear before your committee and to discuss with you the question of providing communications satellite services for the Department of Defense and the national communications system.

I shall endeavor to cover the matters requested in the chairman's letter to me of August 19, 1966.

OPERATING ACTIVITIES

RCA Communications, Inc., is a wholly owned subsidiary of the Radio Corporation of America. It is an international carrier operating a global communications network consisting of a complex of radio, coaxial cable, and satellite channels.

RCA Communications, which, in the interest of brevity, I shall refer to as “RCA," provides international telegram service between the United States and more than 200 overseas points; Telex service to and from 117 points; and leased channel; that is, private line, services with all parts of the world.

RCA also provides facsimile transmission service with 60 overseas points and operates a network of telephone circuits in the Pacific area radiating from Guam and the Philippines. The company provides two-way broadcast program transmission service with most points on the globe. In September 1965, RCA began handling the transmission of live commercial and closed-circuit television programs via satellite between the United States and Europe.

RCA has pioneered many global communications services, including international leased channel service, which was introduced in 1948; overseas Telex service in 1950, and international data Telex transmission service in 1962.

I submit a brochure entitled "RCA Global Communications" containing a network circuit map, so that the committee can visualize the scope of RCA's operating activities.

SERVICES TO THE U.S. GOVERNMENT

RCA radio and cable facilities are used to handle critical military and nonmilitary Government traffic throughout the world, and the services it furnishes to DOD are extensive. We currently provide the U.S. military with a wide range of leased communications circuits in the Atlantic, Caribbean, and Pacific areas. These facilities are used for voice, high-speed data, and conventional teleprinter transmissions. The Pacific cable and radio circuits are vital at this time since they handle traffic critical to military operations in South Vietnam.

Since the earliest days of Project Mercury, RCA has provided the National Aeronautics and Space Administration with an ever-expanding global network of communications facilities used for U.S. space programs. We also provide long-haul communications facilities for the Weather Bureau, Voice of America, the U.S. Information Agency, and a number of other civil agencies. Included in our current roster of Government services is the radio "Hot Line," which links Washington to Moscow.

We provide leased channels for the U.S. Department of State, which carry diplomatic communications between Washington and U.S. Em- ! bassies in other parts of the world. In so doing, RCA is sharing in the responsibility to meet, as Mr. Scott expressed it, the State Depart. | ment's "basic requirement to communicate rapidly, reliably, and securely with and between" its diplomatic posts throughout the world.

The creation of RCA was itself intimately related to providing critical service to the U.S. Government. It was the inadequacy of U.S. facilities for international communications during World War I which prompted the U.S. Navy Department, in 1919, to sponsor the organization of RCA. Then, às now, RCA's mission was to provide international communications services for the U.S. Government and the American people in time of both peace and national emergency.

For each of the calendar years 1962 through 1965, the total RCA Communications services to agencies of the Government, including DOD, were, respectively, in dollars and in percentages of its total operating revenue: $4.3 million or 11.6 percent; $4.6 million or 11.1 percent, $5.3 million or 11.9 percent, and $7.8 million or 15.1 percent. For the first 7 months of 1966, comparable amounts were $6.1 million or 18.6 percent. With respect to communications services to DOD for the years 1962 through 1965 and for the first 7 months of 1966, the comparable figures are $2.7, $3, $3, $4.4, and $4 million.

This year, over 98 percent of all services to DOD were in the leased channel service category. The reasons for the increase in RCA's services to the Government in the last 3 years are the growing U.S. space program and expanding U.S. military commitments.

RCA leased channel services are provided on a month-to-mo basis to the U.S. Government. RCA has made substantial investme in communications facilities to provide such services without lo term commitments or other obligations by the U.S. Governmen

Since the beginning of 1962, RČA has invested $72.5 million in a tional communications facilities to improve and expand its over communications services, including services for the U.S. Gor ment. RCA has invested in the business substantially more the total profits from communications operations during the same

RCA's present total assets employed in the communications bi amount to $102 million. It has approximately 3,500 emplorating its global system.

SUMMARY OF RCA POLICY POSITION

RCA has long advocated the establishment of a global communications satellite system at the earliest practicable cause of its belief that the role of satellites in our interna municaions system is growing, RCA acquired 250,000 sh

percent of Comsat common stock. RCA does not have an RCA official on the board of directors of Comsat.

In order to implement the growth of satellite communications as an integral part of the Nation's global communications system, RCA has consistently urged the participation by the authorized common carriers in the direct ownership and operation of the initial earth stations for commercial service.

However, in May 1965, the Federal Communications Commission established an interim policy under which Comsat would have the sole responsibility for the design, construction, and operation of the three initial earth stations, at Andover, Maine, Brewster Flat, Wash., and Paumalu, Hawaii. The Commission determined that this earth station policy was a temporary measure only and is subject to the outcome of any proceedings on conflicting applications.

On September 1, 1965, RCA filed applications to participate in the ownership and operation of these three initial earth stations. The RCA applications are now pending before the Commission. We have also joined with other international carriers in requesting authority to construct, operate, and own an additional earth station in the southeastern part of the United States.

We believe that participation by the authorized international carriers in earth station ownership and operation is the best course available to meet the objectives of the Communications Satellite Act of 1962 and to assure the economic viability of the international carriers. There is no question in our minds that if participation in ownership and operation of the earth stations were to be permanently foreclosed to the international record carriers, they would be relegated to secondclass citizenship in international satellite communications. This, I might add, would severely diminish their ability to maintain and develop the most advanced international record and voice-record services.

In the recent authorized user proceeding on satellite services, FCC docket No. 16058, the Commission concluded that "Comsat is to be primarily a carrier's carrier ** *.” RCA supports this conclusion and would like to add that in its belief the Government is the only noncarrier entity which may lawfully be permitted to deal directly with Comsat—and then only in unique or most exceptional circumstances. Under all other circumstances it remains in the national interest for both Government and non-Government users to procure communications services, including those via satellite, from the international carriers established for this purpose.

We believe that the Commission has the licensing authority, and the responsibility, to regulate the scope of the services to be furnished by Comsat and by other interational carriers as will best serve the public interest, convenience, and necessity. The Commission's authorized user decision is a proper exercise of that authority in our view, and it was required by the public interest.

We are firmly committed to the belief that the national interest requires a strong common carrier resource to serve the Government and the Nation as a whole in times of peace and of war. We therefore have been alarmed by Comsat's apparent attempt to usurp the historical common carriers' function of providing leased channels directly to users, including the U.S. Government. Comsat, we submit, is using the great leverage of its exclusive satellite position to seek a preferred position in furnishing communications service directly to the Government. This Comsat has clearly demonstrated by its activities with respect to the 30 Pacific satellite circuits.

87-906-8636

At the outset, Mr. Chairman, I would like to say that I fully support the urgent need for these circuits to meet the military requirements. It has always been RCA's objective that the military obtain the commercial services required in the specified time frame.

THE 30 PACIFIC CIRCUITS

The 30 Pacific circuits are the first satellite circuits on which the Defense Communications Agency has solicited bids, from Comsat or the carriers. We believe that the ultimate outcome of this controversy may well be the benchmark against which future awards are measured and thus can determine whether our existing international common carrier resources will continue to grow and best serve all the people of our country.

As you know, DCA awarded the contract to Comsat, although it has reserved the right to assign the contract to another international carrier or carriers. RCA has protested this award on grounds that will be made clear as I describe the relevant happenings during the course of the bidding. Because it is an involved story, let me first summarize the principal reasons for our concern:

First, RCA and apparently other authorized carriers were not informed by DCA about this Government requirement until substantially after it had been communicated to Comsat by DCA, and after Comsat had used this time advantage to reach understandings with certain foreign correspondents. These understandings were considered by DCA to be decisive in its subsequent award.

Second, we do not believe RCA received equal treatment with Comsat in certain critical respects.

Third, the decision to award the contract to Comsat was, we are convinced, based upon the misconception that there is something unique about these 30 circuits, as opposed to the established transpacific facilities being furnished efficiently by RCA and as opposed to future satellite circuits for similar purposes.

The 30 circuits are required for the transmission of general military communications between Hawaii and the Far East. As General Starbird testified, there is no security aspect to the communications which will be carried on the satellite circuits. DOD has equally critical material flowing on the Pacific cable circuits furnished by RCA and other carriers at

the present time. According to Mr. McCormack and Dr. Charyk, Comsat was first approached by DCA with respect to the 30 circuits on Christmas Eve 1965, although there had been earlier Comsat-DCA discussions in connection with the capability that would be available in the Pacific. However, it was not until ÞCA's letter of May 2, 1966, that DCA inquired whether RCA desired to bid on the 30 circuits. DCA then informed RCA of its specific requirements for the 30 circuits and set forth the detailed technical and other specifications required in preparing and submitting a proposal.

The bid request asked the carrier "to act as DOD's agent with respect to those circuit segments provided by all domestic international,

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