less than 8 working hours, to respond to this new capacity, and to submit 14 different commitments involving 3 foreign terminals and several million dollars of guaranteed legal foreign obligations on RCA as principal, without proper assurance of recompense from the Government. Why the change? RCA has become the low firm bidder for the Hawaii terminal as set forth in its letters to DOD of June 17 and July 13. Therefore, the award should have been made to RCA. It now appears, however, that Comsat has undertaken to accept foreign liabili ties indicated in the draft preliminary CSA presented on July 15. This raises the question of Comsat illegally absorbing foreign terminal charges, a question within the jurisdiction of the FCC that should be resolved before considering any award to Comsat. The new approach raises serious legal problems We submit that DOD's approach is not in accordance with ASPR. Where a substantive change has occurred in the basic conditions of the request for pre posals, the bidding parties should have a fair opportunity and adequate time te respond to the changed conditions. Moreover, where as in this case RCA'S clear understanding was based on acting as DOD's agent for the foreign terminal charges and this was specifically set forth in its proposal, DOD was obligated to inform RCA at an early date that its understanding was not in ae cord with the request for proposals. We are concerned here with a new state of the communications art and foreign risks that are difficult to measure. It is in the national interest to extend satellite communications to Japan, Thailand and the Philippines as soon as practicable. However, if a U.S. carrier assumes the inherent risks sought by DOD, this could severely increase the costs that will have to be borne by other American users. Losses at the foreign terminal in providing this service will adversely affect the overall return requirement of the U.S. carrier and can preclude passing on to the American public the economies of satellite communications. We submit that the Government should not under any circumstances through its great power impose upon an American carrier multimillion-dollar liability for charges at the foreign terminals. We submit that the financial risks now requested of a U.S. carrier should properly be assumed only by the Government. It is the Government's major interests that will be served and its need for satellite circuits to these new points. Comsat should not be allowed to foreclose other carriers In order to respond fully to the draft preliminary CSA, RCA requires specific termination charge information from the foreign terminals. Evidently Comsat has this information and its negotiations have effectively foreclosed other U.S. carriers from the information. RCA has had exceptionally friendly correspondent relations with Japan for over 45 years and with Thailand for decades. Notwithstanding these friendly relationships, RCA has been unable to obtain the specific foreign termination an? cancellation charges necessary to complete the draft preliminary CSA. KDD, for example, has informed RCA that the termination and cancellati charges would not at this time be given to any U.S. carrier other than Comsat. KDD has referred to the "U.S. domestic problem" and the controversy over Comsat's intended role in satellite communication. It is evident that KDD does not wish to become involved in this controversy but would operate with RCA if awarded the contracts. Thus, if RCA is given the opportunity to acas DOD's agent, this information can be obtained and the foreign termin charges will be the same for RCA as for Comsat and, therefore, to the Gover ment. RCA should not be precluded from this award because of a new DOD request for information which Comsat has but RCA has been denied at this time. We submit that no action should be taken that enables Comsat to exercis its monopoly power over satellites and earth stations in any manner that won'. effectively foreclose another U.S. carrier. If DOD insists at this time on leza commitments for the foreign terminals in the form of the new preliminary CSA it will be creating conditions favorable only to Comsat. The Congress has directed that Comsat shall “be so organized and operat = -> as to maintain and strengthen competition in the provision of communication services." (Communications Satellite Act, sec. 102 (c)). It should be noted that DOD's draft preliminary CSA does not require firm commitments with respect to the Philippines. Evidently this is because Comsat does not have such commitments. Thus, in any event, Comsat is in no better position in this respect than RCA. DOD alternatives RCA was prepared on July 15 to agree to a preliminary CSA consistent with its understanding of DOD's request for proposals. It has sought throughout in good faith to resolve this complex and vital matter in the best interests of both the Government and the international communications industry. RCA offers the lowest cost to the Government for the Hawaii terminal. It undertakes as an overriding consideration to maintain the charges at the foreign terminals at the lowest cost to the government. RCA deeply regrets this unresolved problem with DOD and respectfully requests that DOD consider the following: (1) For the reasons stated above, DOD should modify the preliminary CSA with respect to Japan and Thailand to be consistent with the foregoing. This would require revisions to make clear that RCA will be acting as DOD's agent with respect to the foreign terminals as provided in DOD's request for proposals of May 2, 1966; (2) In the alternative, if DOD still insists on the new and unprecedented approach requiring maximum cost commitments, subject to FCC ultimate tariff approval, RCA requests that DOD (a) grant a reasonable extension of time to respond on this basis to DOD and (b) make available to RCA the same information with respect to foreign terminal cancellation and termination costs available to Comsat but denied to RCA. RCA is prepared to cooperate fully with the Department of Defense. If awarded the contracts, RCA believes that it will provide the required service for DOD at least as promptly as Comsat and with as low a cost for the foreign terminals. RCA will provide the service at lower cost for the Hawaii terminal, thus producing the lowest overall cost to the Government. Respectfully, HOWARD R. HAWKINS, President. RCA COMMUNICATIONS, INC., July 21, 1966. Maj. Gen. GEORGE E. PICKETT, Deputy Director for Defense Communications System, DEAR GENERAL PICKETT: This is in response to the Defense Communications Agency's request that RCA complete the attached CSA draft No. 4, dated July 14, 1966, with respect to furnishing 30 satellite circuits from Hawaii to Japan, Thailand, and the Philippines. RCA has now completed the CSA draft No. 4, which is returned herewith to DCA. We have endeavor to be fully responsive to DCA's request, and the CSA draft No. 4 has been retyped in its original form for the convenience of DCA. We have completed the CSA draft on the basis that the charges for satellite utilization with 42-foot transportable stations at the Thailand and Philippines terminals would be based on a ratio of 61⁄2 to 1 during the first year. We foresee the probability with RCA's proposed method of operation of the earth terminals that the satellite utilization ratio and charges would be substantially reduced during this period. We would, of course, pass on to the Government any satellite utilization economies that would be realized by RCA from more efficient operations. RCA proposes to provide the transportable terminal stations for operations in Thailand and the Philippines. Arrangements have been made to obtain one earth terminal from Page Communications Engineers. This earth terminal is now being checked out at Taylors Island, Md., and can be delivered within a period of 90 days. We propose to use this earth terminal to advance the inservice date for circuits from one of the countries, if desired by DCA. Arrangements also have been made by RCA to obtain a second transportable earth terminal from Comsat. This earth terminal is presently being readied for temporary use by Comsat at its Brewster Flat location. Comsat would release the terminal to RCA about January 1, 1967, in order to meet the requirements of DCA. RCA is prepared to proceed immediately to provide the 30 Pacific satellite circuits in accordance with its proposal and CSA draft No. 4. It will cooperate fully with DCA and Comsat in achieving defense communications requirements in the Pacific area. We are confident that, with a prompt award to RCA, the requirements and timetable of DCA can be met for these important services. Respectfully, HOWARD R. HAWKINS, President. RCA COMMUNICATIONS, INC.. July 22, 1966. Maj. Gen. GEORGE E. PICKETT, Deputy Director for Defense Communications System, Washington, D.C. DEAR GENERAL PICKETT: This will confirm the information furnished today in response to the Defense Communications Agency's inquiry concerning RCA'S operating arrangements with the Philippines, Japan, and Thailand. RCA has completed CSA draft No. 4 in the form requested by DCA. There fore, it has assumed the responsibility for foreign operating arrangements in furnishing the 30 Pacific, satellite circuits. DCA thus has the assurances of RCA, an experienced and responsible international carrier. RCA would not have submitted the CSA in this form if there were doubts about its ability to perform for DCA. RCA has long-established operating agreements and relationships with all three countries. RCA has operated as a franchised carrier in the Phillippines for more than 30 years. It provides overseas voice and record services by radio and cable between the Philippines and countries throughout the world, including direct circuits between Hawaii and the Philippines. In Many 1965 the Philippine Congress approved a new franchise, Republic Act No. 4617, granting to RCA "the right and privilege of constructing, maintaining, and operating communications systems by radio, wire, satellites and other means *** between any point in the Philippines to points exterior thereto." RCA also has two older franchises, Republic Acts Nos. 3178 and 3180, covering its operations in the Philippines. RCA has a long history of working with the Philippine Government. RCA has had correspondent relations with the Japanese International Communication Entity, Kokusai Denshin Denwa Co., Ltd., and predecessor organizations for 50 years. This close association in all communications matters was interrupted only during the period of World War II, and shortly thereafter we entered into a new traffic agreement covering all types of service. More recently this traffic agreement was up dated to provide for the new means of communications which have come to the fore in addition to the voice radio circuits originally operated. RCA and KDD are venerable associates for both voice and record communications of every description. KDD has informed RCA and otherwise made clear that KDD will not inject itself into what it considers to be a U.S. decision; namely, which American company will provide the 10 satellite circuits for DCA. It is equally clear that KDD will cooperate with RCA if it is selected to provide the service for DCA. RCA has been the United States and Philippine correspondent of the Thailand Ministry of Communications for almost 40 years. RCA is the only American organization with a continuous and currently working direct circuit between the United States and Thailand. The cooperative relationship existing between RCA and Thailand cannot be duplicated by any other U.S. carrier. Within the last few months a new traffic agreement between Thailand and RCA was prepared covering every type of service and every means of communications between our respective organizations. It specifically provides for communications via satellites. Mr. Charles H. Clark, vice president, Far East, for RCA has been in regular negotiation with the Thailand Ministry of Communications and has received assurances from that country of complete cooperation in the event RCA receives the order for 10 circuits via satellite between Hawaii and Thailand. We have no doubt that the DCA requirements can be met in the manner desired and by the date specified. The best assurance that DCA can have relative to the provision of all of these circuits is the standing of RCA in the American business community and its successful record of implementing a great many overseas circuits for DCA. RCA has expended much time and effort on this proposal to DCA. It has undertaken in all respects to meet DCA's requirements for these important services. We submit that it would now be unfair and unreasonable to exclude RCA and to make an award to Comsat on the basis that Comsat has prior formal agreements in two of the three countries, which it was able to obtain, at least in part, because of prior knowledge of defense requirements. We submit further that in any event the nature of foreign agreements should not determine U.S. policy. For DCA to make a decision on this basis would clearly mean that the U.S. Government would have relinquished control over its international communications to the entities in other countries. In any event, Japan and Thailand have indicated their willingness to operate with whichever American carrier receives the award from DCA. In addition, RCA has the unique combination of long-established operating agreements and the assurances to provide these services. We therefore sumbit that the national interest will best be served by an award to RCA. In the circumstances, it is clear that the Government's needs can be effectively met by an award to RCA as an authorized international carrier and with Comsat in its role as a carriers' carrier. We are confident that, with a prompt award to RCA, the requirements and timetable of DCA can be met for these important services. Respectfully, HOWARD R. HAWKINS, President. DEFENSE COMMUNICATIONS AGENCY, July 26, 1966. RCA COMMUNICATIONS, INC., GENTLEMEN: Reference is made to Defense Communication Agency's request for the proposal dated May 2, 1966, for 30 alternate voice/data circuits in the Pacific area. An award was made for these services to Communications Satellite Corp. In conjunction with this award, the following information is provided: (a) Five prospective contractors were solicited; (b) Five proposals were received; (c) The award was made to Communications Satellite Corp., 1900 L Street NW., Washington, D.C. (d) The prices contained in the proposal were as follows: 1. Hawaii to Japan, monthly recurring charge per circuit $16,500; 2. Hawaii to Philippines (first year) monthly recurring charge per circuit $28,066; 3. Hawaii to Thailand (first year) monthly recurring charge per circuit $31,217. The award was made on the basis that: (a) The Government has greater assurance that the services will be provided on time if ordered from CSC; (b) The Government has greater assurance of having obtained the most economical proposal taking into account the regulatory situation, acceptable recurring charges, and contingent liabilities. Thank you for your efforts in response to the DCA request for proposal. JOHN G. VANCE, (Whereupon, at 12:45 the subcommittee recessed, to reconvene Tues day, September 13, 1966.) |