Page images

be, we had no authorized user decision out. We had our rates on file of our initial bid of some $11,000 or whatever it happened to be. I knew Comsat was the low bidder, around $4,000. The press was replete with this information, so certainly I was not going to go through the mental exercise.

Mr. ROBACK. What did you do then? When the FCC decision was publicized and you became aware of the substance of it, and you asked for permission to resubmit which was denied, then what did you do?

Mr. GALLAGHER. What did we do then?
Mr. ROBACK. Did you drop the whole affair?

Mr. GallagHER. I do not think we dropped the whole affair. We had been writing all along through August 30 and asking questions of DCA, and we will submit all of this correspondence, sir, for the record.

Mr. ROBACK. What were you asking them, for example!
Mr. GALLAGHER. Well, let me see-

Mr. ROBACK. I mean after they told you that you could not bid, there was a cutoff date.


Mr. GALLAGHER. Well, for example, when they came back and told us they were still going ahead and giving it to Comsat because Comsat could assure to them the earliest possible service, etc., we asked them what they meant by this, and so forth.

Now, on this particular point of earliest possible service, I think it should be perfectly clear in the record that when the earth station comes into being at Brewster Flats or at Paumalu, and the bird flies, from the very moment that the earth stations come into being and the birds fly, we can offer the service as quickly and as expeditiously as Comsat at this side of the link. There is no question with respect to that at all, no question.

So to that extent I believe the opinion of DCA is in error, to that extent on this side of the ocean.

Insofar as the other side of the ocean is concerned, I still feel that given the opportunity we can do the job quicker and, at the same time, protect the Paumalu and Brewster Flats sites for the Apollo program and for the DOD.


Mr. ROBACK. So far as the contracting officer was concerned though, he had an offer from Comsat which was a third of the price that you were offering

Mr. GALLAGHER. Yes. He had a price

Mr. RoBACK. Regardless of the service-I mean the service factors had to be evaluated as part of the responsibility of the bidder, but as a matter of price consideration, your offering

Mr. GALLAGHER. At that particular point in time, sir, he had an invalid offer, that particular offer, by virtue of the decision, an invalid offer from Comsat, an invalid offer that could, perhaps, be made valid by a petition for reconsideration by DCA that might possibly be approved by the Commission.

Mr. ROBACK. Well, it was not necessarily invalid in the sense that it still had to come before the FCC. If the FCC approved the tariff

Mr. GALLAGHER. That is exactly what I have said, Mr. Roback. Mr. ROBACK. Well, it was not invalid, it was undetermined.

Mr. GALLAGHER. I will accept the word, undetermined at that particular point in time.

Mr. ROBACK. That is to say it was undetermined in the sense that the FCC had not passed upon it.


Mr. ROBACK. But as far as the contracting officer was concerned, he was making an evaluation on what was in front of him.

Mr. GALLAGHER. That is right. There is no question.

Mr. ROBACK. But anyway you are offering something like $11,000; right?

Mr. GALLAGHER. We were offering $11,000, sir, when we did not have an authorized user decision.

Mr. ROBACK. When the authorized user decision came out, what did you

offer then? Mr. GALLAGHER. We asked to offer something, sir, and they said, "No, we don't want the offer."

Mr. RoBACK. Did you then go to the FCC and offer it to them?


Mr. GALLAGHER. I have had very many conversations with the FCC with respect to the new rate structures that are going into being, and, as a matter of fact, I hope that the typing is finished this afternoon or tomorrow morning, and that we will, in fact, file our new rate structures.

Mr. ROBACK. You are proposing to file a new rate structure with the FCC for which part of the world?

Mr. GALLAGHER. For the Pacific.

Mr. ROBACK. Will this be for defined routes or for all routes, all areas?

Mr. GALLAGHER. It will cover basically all areas of the Pacific, sir.

Mr. ROBACK. Are you in a position to tell us what that is, or would it be premature?

Mr. GALLAGHER. I would rather say to you this, sir, that in courtesy to the FCC I would rather disclose the specific rates to the FCC first. However, I have no objection to telling you that our philosophy is one of composite rate structure. Our philosophy is also one which requires a certain amount of fill in the cable system.

Our philosophy also goes to the question of new satellite circuitry, new business from the satellite circuits, because I think that we sometimes get lost in the word "economies," in passing on economies, that will accrue from the satellite system, because in certain instances, sir, the economies are nothing more than a rate reduction.

There are, in fact, some instances of no economies to the carriers, no economies by the rate structure being offered by Comsat.

Mr. Roback. You mean there might be economies to the Government, but it would not be economical for the carriers, is that what you are saying?

Mr. GALLAGIIER. I am not just talking in terms of rate reduction. I am talking about the rate itself.

For example, the rate from San Francisco to Hawaii, I think, is something on the order of $5,400 per month. If you want to compute it out it is something like $65,000 a year, roughly. This is what it costs us to get a channel from Comsat.

In the long haul, we can produce a rate to the carriers, the cost to the carriers, which is less than $65,000 on the cable channels. So that basically when they say, “Are you passing on an economy," I am passing on a rate reduction. It is costing me more for the satellite channel than it is costing me for the cable channel.

Mr. ROBACK. You have the philosophy of the composite rate. Would you say that was generally true of the industry!

Mr. GALLAGHER. Generally true of the industry!
Mr. ROBACK. Of the international record carriers, for example.

Mr. GALLAGHER. Well, frankly speaking, I listened to Mr. Hawkins testimony yesterday, and I would rather—and believe me I have no information on the particular point at all—but I would rather gather what he was thinking was in terms of offering a special Government rate.

Mr. ROBACK. A special Government rate?
Mr. GALLAGHER. I do not know if that happens to be the fact.

In other words, I say I do not know what they are going to offer, sir. I have seen the ITT application for offering of a $7,100 rate out in the Pacific, and that appears to be on some form of composite rate structure basis. They also have qualifications in their application.

Mr. ROBACK. You are saying that your offer will be without qualification?

Mr. GALLAGHER. My offer for rate structure will take into consideration two components. It will take into consideration the fill of the cables, and new satellite business, and that new satellite business does not necessarily have to come from the DOD.

(The following material was furnished for the record on Septem

ber 14:)

BEFORE THE FEDERAL COMMUNICATIONS COMMISSION In the Matter of Western Union International, Inc., Application for Authority

Pursuant to Section 214 of the Communications Act of 1934, as Amended, to Lease and Operate Satellite Channels to Provide Communications Services Between Continental United States and Harcaii, and Between Them and Foreign Points in the Pacific Area

File No. T-C-2025


Western Union International, Inc. (WUI), hereby applies for authority under section 214 of the Communications Act of 1934, as amended, to lease and operate:

Up to 65 satellite voice-grade circuits to provide communications services between the U.S. mainland on the one hand, and Hawaii, Australia, Japan, the Philippines and Thailand on the other hand, and between Hawaii on the one hand and Australia, Japan, the Philippines and Thailand on the other hand, to provide its regular authorized services as set forth herein ;

Satellite television channels, as required ;

Connecting landline circuits on the U.S, mainland and Hawaii. In accordance with section 63.01 of the Commission's rules, WU'I submits the following information in support of this application :

1. WUI is a corporation organized and existing under the laws of the State of Delaware. WUI is a common carrier subject to section 214 of the Communications Act. WUI is also a "communications common carrier," "authorized carrier," and a “U.S. communications common carrier" as those terms are defined or used in sections 103(7), 201(c)(7), and 305 (a) (2), of the Communications Satellite Act of 1962. WUI is engaged in the business of furnishing international communications services throughout the world. Correspondence concerning this application may be addressed to the undersigned.

2. The facilities covered by this application will be used by WUI to supplement its existing Pacific facilities, to provide all of its regulatory authorized services, and to extend direct service to Japan and Thailand.


3. The facilities covered by this application will be utilized by WUI to provide the following services, as enumerated by the Commission in its comprehensive order and authorization of April 8, 1964 (file No. 1749, etc.) : "telegraph message service; telex service; leased telegraph channel service; facsimile (including photo) and data and program transmission services, including voice for cue and contact control; any other record service; leased circuits for alternate voicerecord use; and leased circuits for alternate and simultaneous voice and nonvoice use by defense agencies of the U.S. Government.”

4. The facilities requested by this application between the U.S. mainland and Hawaii will also be employed for alternate voice use in connection with datel service (dataphone-type service), pursuant to the Commission's order of February 21, 1966 (2 FCC 2d 605).

5. WUI requests authority to utilize satellite channels for the transmission of television programs between the continental United States and Hawaii, and between either or both of them and other Pacific points to the extent satellite facilities become available for this service. These television channels will be utilized from time to time in accordance with requirements for the provison of broadcasting and closed circuit television transmission services. WUI is willing to join with other authorized carriers in a joint offering of transpacific television service along the lines of the existing joint offering of transatlantic television service, which was authorized by the Commission on July 15, 1965 (1 FCC 2d 82). Continuation of this joint-carrier offering will be in the public interest and will permit each carrier to participate in the Pacific area on a fair and equitable basis without prejudice to ultimate arrangements or to the interests of any entity.

6. The charges for certain of the services covered by this application are discussed below under the appropriate heading.

SUMMARY OF PROJECTED WUI REQUIREMENTS 7. The 65 satellite voice-grade channels herein requested are intended to be used as follows:

Maximum number Points serviced or transited :

of channels U.S. mainland-Hawaii..

15 U.S. mainland-Japan..

3 F.U.S. mainland-Philippines.

3 U.S. mainland-Australia,

3 U.S. mainland-Thailand..

3 Hawaii-Japan

12 Hawaii-Philippines

12 Hawaii-Thailand

15 Hawaii-Australia



65 8. The foregoing represent WUI's projected requirements into 1967 with due recognition accorded to expected capacity in the satellite space segment and earth stations, projected channel assignments by foreign telecommunications entities, increasing Defense Communications Agency (DCA) requirements, and continuation of the Commission's authorized user policy (4 FCC 2d 421). The channel assignments by foreign telecommunications entities, which we have assumed, are predicated upon the expressed desires of these entities at the recent Pacific satellite planning conference in Australia and upon the expectations of more than bare minimum power capabilities of the Intelsat II satellite.


9. In April 1965, when WUI commenced acquiring broadband cable circuits in the Pacific by indefeasible right of user, WUI was confronted with a shortage of facilities and has been faced with this difficulty ever since. WUI has never been able to acquire by indefeasible right of user (IRU) the maximum number of Pacific circuits authorized to it by the Commission as shown in the chart below. In fact, since the latter part of 1965 WUI has been forced to lease, at tariff rates, capacity in the California-Hawaii No. 2 cable for provision of serrice to a customer at the same charges paid by WUI for the facility. Currently, WUI is forced to lease at tariff rates voice-grade circuits in the CaliforniaHawaii cables and in the Hawaii-Guam cables, notwithstanding Commission authorizations for WUI to acquire these facilities on an IRU basis. WUI also leases voice-grade circuits in the Compac cable owned by the British Commonwealth partners at carrier-to-carrier rates. However, Compac facilities are be coming exceedingly scarce and WUI has received several requests to turn back one of these circuits.

10. WUI's existing Pacific cable circuit authorizations and utilizations are as follows:

[blocks in formation]

1 Applications are now pending before Commission for additional authorizations.

11. The cable facility shortage between the mainland and Hawaii is so acute that WUI intends to commence leasing satellite channels between these two points as soon as they become operational at an acceptable quality. These initial satellite channels will be used not only for Hawaiian terminal comm unications but also for transmitting communications beyond Hawaii in tandem with cable facilities.




12. The burgeoning communications requirements between the United States and the Pacific points covered by this application are so substantial that competition among the U.S. full service carriers is reasonably feasible. Competition by WUI in this area is clearly in the public interest.

13. The increasing communications requirements in the Pacific are illustrated by the 30 alternate data-voice circuits required in the interests of the Nation's defense. On May 2, 1966, the Defense Communications Agency (DCA) invited WUI to submit bids for up to 30 alternate data-voice leased satellite circuits from Hawaii to the Far East. DCA advised that up to 10 circuits were required from Hawaii to Japan, Philippines, and Thailand, respectively, with service to commence on or about April 1, 1967.

14. WUI submitted bids on May 31, 1966. Subsequently, on June 24, 1966, WUI requested the opportunity to submit revised bids on the grounds that (a) the Commission announced its satellite authorized user policy on June 23 and suggested to the carriers that they revise their leased channel rates to reflect satellite economies; and (b) Comsat advised WUI on June 22 of downwani revisions in estimated charges for satellite circuits in the Pacific. DCA denied WUI's request to submit revised bids, and on July 1, 1966, advised that the contract would be awarded to "the U.S. Communications Satellite Corp."

15. It is WUI's understanding, based on information and belief, that the contract between DCA and Comsat, effective on or about July 26, 1966, contains an "assignability clause” permitting the assignment of Comsat's rights and obligations to one or more authorized full service carriers. Such an assignment will be necessary pursuant to the Commission's authorized user decision which pirovides "that only in unique or exceptional circumstances should noncarrier entities

« PreviousContinue »