GOVERNMENT USE OF SATELLITE COMMUNICATIONS TUESDAY, SEPTEMBER 13, 1966 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MILITARY OPERATIONS OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2247, Rayburn Office Building, Hon. Chet Holifield (chairman of the subcommittee) presiding. Present: Representatives Chet Holifield and Frank Horton. Also present: Herbert Roback, staff administrator; Douglas G. Dahlin, counsel; Paul Ridgely, investigator; Joseph Luman, defense analyst; and J. P. Carlson, minority staff. Mr. HOLIFIELD. The committee will be in order. We will continue our hearings this morning on communications satellite issues. Our first witness will be Mr. Edward A. Gallagher, president of Western Union International. Mr. Gallagher, will you introduce your associate for the record, and proceed. STATEMENT OF EDWARD A. GALLAGHER, PRESIDENT, WESTERN UNION INTERNATIONAL, INC.; ACCOMPANIED BY ROBERT E. CONN, VICE PRESIDENT AND COUNSEL Mr. GALLAGHER. Thank you, Mr. Chairman. My associate this morning is Mr. Robert E. Conn, our vice president and counsel. Mr. HOLIFIELD. You may proceed. Mr. GALLAGHER. Thank you. I am Edward A. Gallagher, president of Western Union International, Inc. I very much appreciate the opportunity to appear before this committee and to comment on certain aspects of satellite communications and their effect upon the telecommunications industry. Mr. Roback was kind enough to outline in his memorandum of August 11 certain topics for discussion. As you know, Western Union International, known in the industry as "WUI," is one of the three major U.S. international record carriers and is an independent company-not affiliated with The Western Union Telegraph Co. We were created as a result of the divestment of the international cable operations of the Western Union Telegraph Co. pursuant to a 1943 amendment to the Communications Act which permitted merger of the Western Union and Postal Telegraph Cos. As a common carrier under the Communications Act of 1934, and as an authorized carrier under the Communications Satellite Act of 1962, Western Union International offers a full complement of communica tion services not only via submarine cables but also via satellite. Our major international service offerings are message telegrams, Telex service, and leased channels. Our leased channel service includes leased telegraph channels and leased voice-grade channels for alternate data-voice use. Agencies of the U.S. Government are our principal customers for data-voice channels. Submarine cables have played an important role in international communications during the past 100 years, and they will continue to do so in the future. Nevertheless, it is clear beyond question that communication satellites will also play an important role. Together, cables and satellites form an integral part of an improved global com munications network. Recognizing our responsibilities to the public, WUI is making every effort to assume a meaningful role in satellite communications. WUI and the other two major U.S. international record carriers have filed a joint application for authority to construct a satellite earth station. As you know, under the Satellite Act and pursuant to FCC authorization, the international carriers can own and operate ground stations but not satellites. The Commission, in its authorized user decision, analyzed the total revenues of the international record carriers and the proportion attrib utable to Government leases. The Commission indicated that in the year 1965 WUI had net operating revenues of $18,124,000, including $1,924,000 from leased circuit revenues. Government leases accounted for $1,407,000. It is therefore evident that Government leases provided a substantial part of our revenues. During the current year, revenue from Government leases continue to be an important part of our total revenues. At the present time, Government lease revenues exceed $300,000 per month. In the authorized user decision, the Commission recognized the importance of Government leases to the international carriers. In this decision the Commision noted that: For each carrier, revenues from services to the Government are essential to a fair rate of return and provide a sizable part of its total profit margin. Thus the loss 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 cost of satellite circuits, they would probably have to seek substantial rate increases. Comsat was intended to be a carrier's carrier and-absent extraordinary circumstances-users of satellite facilities should be served by the international carriers. The FCC has so held-and generally we agree. We have endeavored to stay abreast of the hundreds of pages of testimony in this hearing regarding the 30 satellite circuits required in the Pacific by the Defense Communications Agency (DCA). The chronology of events has already been discussed in detail. As noted by Mr. Roback at page 196 of the transcript record "after months of dealing with Comsat," DCA gave the carriers just 28 days to formulate their proposals. Also, at page 630 of the record Mr. Dickinson and Mr. O'Connell agreed that the carriers were "very narrowly" limited in the time frame as compared with Comsat. In my opinion if the carriers had received the same amount of time as Comsat, DCA could obtain service at least as soon as Comsat proposes and perhaps even sooner. Conducting the necessary negotiations with the overseas telecommunications entities are an everyday occurrence in our business. There is nothing unique about furnishing a transportable earth station overseas to get the service started. In fact, we have undertaken arrangements to supply transportable stations in both the Philippines and Thailand to be operable on or about April 1, 1967. A year ago we had under our control and did in fact test, pursuant to FCC authorization, a transportable earth station. Mr. Chairman, perhaps this might be, with your permission, a good time for me to digress from the prepared testimony for a moment and state that I am questioning the wisdom of the plan for furnishing DCA with transportable ground stations by Comsat under the present plan. If I may explain: actually we know that we will eventually have an 85-foot dish, a permanent dish, at Paumalu at Hawaii. Additionally, we will have an 85-foot permanent dish at Brewster Flats. But at the start-off we will have 42-foot transportable dishes. Now, the present program contemplates the shipment, the disassembly, and then reassembly of these transportable ground stations from Brewster Flats and Paumalu to the Philippines and Thailand. At that particular point in time, Brewster Flats and Paumalu will be left with 85-foot dishes. There will be no backup, there will be no alternate facilities. Now, to me this is a very serious question. I think it is a question that the people responsible for the Apollo program, and the people responsible for the DOD program should reevaluate. We have ground stations that we can ship to the Philippines, we have ground stations that we can ship to Thailand. Mr. HOLIFIELD. What size? Mr. GALLAGHER. Forty-two-foot dishes, sir. Paumalu and Brewster Flats are going to be left with one facility each. The basic request for authorizations to install equipment by Comsat at Paumalu and Brewster Flats calls for the building of two 85-foot dishes at each location. They recognize that they needed backup. There will be no backup for, perhaps, a period of 6 months or a year until they move forward, perhaps, on their second 85-foot dish program if that is the route that they are going to take. Now, at the present time the present program calls for the routing of traffic in through Paumalu or in through Brewster Flats. The cables are filled between the United States and Hawaii. If Brewster Flats goes down, and I recognize there are certain standby elements within the 85-foot dishes, transmitters and receivers, but there are common horns. If that dish goes down, Comsat will not be able to furnish the facilities, and there will be no facility available between the mainland and Hawaii because the cables are full. I am recommending that DOD and Apollo consider very seriously the continuance of the two 42-foot dishes at Paumalu and Brewster Flats, and make use of the available transportable stations which we have secured from Page Communications, and let us ship those to the Philippines and Thailand. Then we know that until such time as the second 85-foot dishes are available or the alternate facilities are available, that certainly the Apollo program and DOD are fully protected. Mr. HOLIFIELD. Are these Page dishes in existence or in process of construction? Mr. GALLAGHER. Basically, sir, we have a handle on one that is basically on the shelf. We have a handle, a firm handle, on a second ground station that we can ship to Thailand if the Thai Government will permit us to bring it in. But here is where we have problems because we do not know what the arrangements are between the Thai Government and Comsat. I want to make it perfectly clear that I do not blame DOD for taking the actions that they did take some 6 months ago in soliciting a bid from Comsat. I think a great deal has been said about the fact that DOD did, in fact, solicit the bid. But basically I wonder what would have been said if a regular customer, a news agency or somebody else, had gone to Comsat and tried to secure the bid. I do question, however, the way in which the bid was put out. I do question the way Comsat then proceeded to move once they got the request for bid. Let me continue. We believe that we can provide the required 30 circuits with dispatch and at reasonable and attractive rates. DCA might be in a better position today with respect to expeditious service had it dealt with all the carriers on an equal basis at the same time. It has been extremely gratifying to us in dealing with DCA over the years to know that we have played some part in our Nation's defense efforts. We have always endeavored to furnish service promptly and efficiently to DCA. We are pleased to note that the record in this proceeding at page 578 shows there has not been any delay in furnishing any important Government service. We have been very pleased with the procurement apportionment policies of DCA which have led to a more balanced international communications industry in the pullic interest. We believe that DCA's needs can be served and, at the same time, the FCC's broader functions of insuring adequate service to all users at reasonable rates can be fulfilled. Mr. Chairman, just to digress for a moment with respect to these transportable ground stations, I assume this committee is well aware of the fact that the FCC must, in fact, authorize the removal of these transportable ground stations for shipment to Thailand and the Philippines. Mr. HOLIFIELD. We understand. Mr. GALLAGHER. And I do not know whether or not the FCC, in its wisdom, will leave those stations barren. One of the most pressing problems before us today is the question of satellite earth station ownership. In this connection, on July 7, 1966, I addressed a letter to Chairman Hyde, with copies to all interested carriers, leaders of industry, labor, and Government, recommending that the carriers put aside their own corporate self-interests and join together in a cooperative endeavor with joint ownership vested in both the carriers and Comsat. A copy of this letter is attached hereto as exhibit A. This proposal, we believe, is in the interest of a sound national telecommunications policy, and is in the interest of the national defense effort and most decidedly in the general public interest. The Communications Satellite Act permits the licensing of earth stations to Comsat alone, one or more carriers, or Comsat and one or more carriers. This is what we are suggesting. The wisdom and foresight of Congress in providing these alternative guidelines for earth station ownership enables us to submit our proposal. We believe that joint ownership of all satellite earth stations, within the Commission's jurisdiction, by Comsat and authorized communications carriers is the answer to the current controversy. During the past 3 weeks all of the carriers, including Comsat, have been meeting under the aegis of the FCC discussing this very question. There seems to be some movement toward a joint ownership approach, although agreement has not yet been reached as to the precise participation by the respective parties. But there is movement toward the suggestions made in our letter of July 7. In the interests of facilitating greater cooperation in satellite matters, WUI has recommended the establishment of a satellite industry liaison committee under the aegis of the FCC. Our recommendations, together with the comments of the other carriers and Comsat, are contained in exhibit B, attached hereto. An industry committee would enable each carrier to stay abreast of satellite developments, irrespective of whether it is represented on Comsat's Board of Directors. An industry committee would, in our opinion, facilitate greater cooperation between the carriers and Comsat, promote optimum utilization of satellite channels and redound to the benefit of the public. Mr. HOLIFIELD. Thank you, Mr. Gallagher. Mr. GALLAGHER. I should like to have, Mr. Chairman, with your permission, the proposal for ownership and operation of U.S. satellite earth stations incorporated into the record as exhibit A, and the recommendation by Western Union International for a satellite industry liaison committee submitted into the record as exhibit B. Mr. HOLIFIELD. They will be accepted and placed in the proper place in the record. Mr. GALLAGHER. Thank you. (The documents referred to follow :) EXHIBIT A PROPOSAL FOR OWNERSHIP AND OPERATION OF U.S. SATELLITE EARTH STATIONS (Reprint of a letter, dated July 7, 1966, to the Chairman of the Federal Communications Commission from Western Union International, Inc.) Hon. ROSEL H. HYDE, WESTERN UNION INTERNATIONAL, INC., Chairman, Federal Communications Commission, DEAR CHAIRMAN HYDE: Notwithstanding the Commission's prompt, affirmative interim decision regarding the ownership and operation of the three initial satellite earth stations in the United States, questions regarding earth stations are still very much before the Commission. The earth station controversy shows no signs of abatement and, indeed, appears to be increasing in intensity. It is in the Nation's interest for its telecommunications industry to come forward with constructive, harmonious proposals for the Commission's consideration as an alternative to the mounting conflicting claims and applications. The purpose of this letter is to recommend some middle ground on which the entire industry can join in resolving the earth station controversy by a willingness to compromise individual corporate positions in order to advance U.S. telecommunications policies. BACKGROUND Since August 1964 more than 1,500 pages of pleadings and applications relating to the satellite earth station controversy have been filed with the Commission. Many thousands of dollars and untold hours of effort have been spent 67-906-6640 |