cations Commission urging that agency to reconsider its announced determination in the so-called "authorized user" proceeding. Because the reports have been so much at variance with the points and principles upon which it appeared that we reached mutual agreement during the conversation we had in your office on June 22, with Harold Geneen, chairman and president of ITT, we had hoped that you would issue a statement to clarify what could only have been misquotation or misinterpretation of what you had written, or perhaps released the letter itself to clear up the matter. Since this has not happened and because this matter is of such pressing national importance, I believe it would be useful to set forth the points and principles we discussed. As I recall it these in summary were: 1. That the skills, facilities, experience, and overseas operating arrangements possessed by the public service international carriers are a national resource of great importance in peace, but especially in times of emergency: 2. That every effort should be made to integrate communication services via satellite with the existing systems and facilities so as to maintain the ability of those carriers to continue to serve not only governmental needs, but also those of the general public, at reasonable rates; 3. That the Government should not renege upon the implied commitment it made when the Department of Defense urged the necessity of a Pacific cable-a facility requiring an investment of more than $100 million made in large part to serve the defense needs of the United States-to continue to use that facility in the reasonably, foreseeable future; and 4. That if the Government maintained its existing cable leases and if the public service carriers were to provide the DCA requirements for new channels via satellite, those extra channels could be provided at no significant extra cost to the Government over Comsat's charge for the channels. As a communications executive of long experience, you accepted without reservation the concept that it is impossible to maintain a communications system of different media if rates for the same services over the different media varied. A composite rate averaging the differing costs of available facilities is the way in which communications entities the world over have passed on to users the benefits of new technology while at the same time protecting investments previously made in facilities needed to serve the public needs. For instance. you agreed that it would be an impossible situation if there were one rate for a telephone call from Washington, D.C., to Los Angeles if the call went over microwave, and another rate if it went via a coaxial cable. Recognizing these facts, it is impossible to accept the proposition advanced by the Department of Defense to you that they can obtain lower cost communications facilities by doing business directly with Comsat. This ignores the fundamental principle that the total communications facilities must be supported by the total revenues. This is the heart of the matter. The reasonableness of rates paid by the DCA for satellite channels must be considered in the larger context of rates for all services paid by all users; quite properly Congress has delegated the authority to determine the reasonableness of rates to the Federal Communications Commission, which over the 30 years of its existence has developed an expertise in resolving such issues in the overall public interest. Congress did not delegate that function to the Department of Defense. In the course of our discussion you indicated that the Pacific cable had been established as early as it was, not because of the economics of commercial traffic but because the Government had urgent and substantial needs for highquality communications services in that area for the foreseeable future. We understood that you agreed that the Government should not renege on the understanding upon which that investment of the funds of over half a million U.S. stockholders was made. You indicated that you thought that it would be inappropriate for the Department of Defense to shift its communications usage from the cable to the satellite without being prepared to pay higher charges for such cable channels as it chose it retain. Indeed, all other users would inevi tably pay more for such services as the burden of joint costs was thrown fully upon them. We expressed doubt that the recently announced rate reductions which will benefit users by over half a billion dollars could be held, were the Government to leave the cables. It was in this context that we explained that ITT World Communications had been informed that the Defense Communications Agency intended to shift 50 percent of its current usage of the cable to the satellite. In such circum stances, we were compelled to quote a composite rate for the satellite channels which reflected the cost of carrying channels in the cable idled by reason of this shift to the satellite. However, that composite rate would have produced a savings on cable channels of $3 million over a 3-year term in excess of the recently announced rates effective October 1, 1966. Moreover, it appeared from the discussion that our composite rate, which was inclusive of certain services such as conditioning and monitoring which Comsat appears to be charging separately, is very close to the Comsat rate. It was agreed that in the circumstances, it would be appropriate for a round table discussion to be held so that the uncertainties of the needs and plans of the DCA, Comsat's charges to the carriers and the carriers' rates to the DCA could be resolved for all concerned. It was with this in mind that ITT Worldcom dispatched its letter of June 27, 1966, to the FCC. In that letter, a copy of which is enclosed, it was stated that ITT Worldcom proposed to establish composite rates for leased channel services such that a customer leasing two channels, one via cable and one via satellite, would pay no more than he would if the channels available in the different media were priced separately, assuming the same usage expectancies. We earnestly request that you use your good offices to urge the Defense Communications Agency to comply promptly with the decision of the FCC in this matter. The recently announced rate reductions by the carriers, resulting in millions of dollars of savings to the Government for cable services are evidence that as the economics of the situation permit, the rates of the public service carriers will be reduced. We are certain that when all needed information is available that the proposals of the carriers and the decisions of the FCC in their totality will provide the most economical and efficient communications services in the best interests of the United States. Very truly yours, T. B. WESTFALL, Executive Vice President. ITT WORLD COMMUNICATIONS INC., Hon. CHET HOLIFIELD, U.S. House of Representatives, Washington, D.C. DEAR CONGRESSMAN HOLIFIELD: As a supplement to letters presented during the ITT phase of the recent hearings, enclosed is a copy of the ITT World Communications Inc. application to the Federal Communications Commission, which was requested by Mr. Roback. We wish to take this opportunity to thank you and the committee members for affording all the privilege of being heard. It is requested that several copies of the hearing be made available to our office when the printing is completed. Should additional information be desired, please let us know. Sincerely yours, JOSEPH J. GANCIE, BEFORE THE FEDERAL COMMUNICATIONS COMMISSION, AUGUST 24, 1966 In the Matter of ITT World Communications Inc., Application for Authorization Pursuant to Section 214 of the Communications Act of 1934, as Amended, to Lease and Operate Satellite Circuits Between Hawaii and Japan, the Republic of the Philippines and Thailand File No. T-C-2014 APPLICATION OF ITT WORLD COMMUNICATIONS INC. ITT World Communications, Inc. (ITT Worldcom), hereby applies for authorization pursuant to section 214 of the Communications Act of 1934, as amended, to lease and operate satellite circuits between the State of Hawaii, on the one hand, and Japan, the Republic of the Philippines and Thailand, on the other hand. Pursuant to section 63.01 of the Commission's rules and regulations, the following is submitted in support of this application. 1. ITT Worldcom is a corporation organized under the laws of the State of Delaware. It has its principal place of business at 67 Broad Street, New York, N.Y. 10004, and is wholy owned by the American Cable & Radio Corp. Correspondence concerning this application may be addressed to Alfred A. Hennings, vice president, 67 Broad Street, New York, N.Y. 10004. 2. ITT Worldcom is a carrier subject to section 214 of the Communications Act of 1934, as amended, and furnishes worldwide oversea communication services by cable, radio, and satellite facilities. 3. The facilities covered by this application will not be used to extend service into territory which is not now served by ITT Worldcom, but will be used to supplement existing cable and radio facilities in furnishing international communication services between Hawaii, and points in or served via Japan, the Republic of the Philippines, and Thailand. 4. On May 2, 1966, the Defense Communications Agency (DCA) informed several U.S. overseas communication carriers and the Communications Satellite Corp. (Comsat) that it had requirements, as of April 1, 1967, for a number of high-quality and highly reliable leased circuits in the Pacific Ocean area to be provided by means other than the present cable facilities. These consisted of up to 30 circuits between Hawaii and Japan, the Republic of the Philippines, and Thailand, that is 10 circuits between Hawaii and each of the named countries. The purpose of this May 2, 1966, letter was to describe this requirement and to determine whether the various companies solicited desired to submit proposals. Responses were submitted by several of the carriers, including ITT Worldcom and Comsat, offering to provide the DCA with its required facilities via satel lite circuits. The DCA ultimately selected Comsat to provide the facilities despite the decision of the Federal Communications Commission in docket No. 16058 which determined that "Comsat may be authorized to provide service directly to the Government, whenever such service is required to meet unique governmental needs or is otherwise required in the national interest, in cir cumstances where the Government's needs cannot be effectively met under the carrier's carrier approach." ITT Worldcom believes that the 30 circuits do not represent unique governmental needs and that those needs can be effectively met under the carrier's carrier approach. Although ITT Worldcom has not seen the contract entered into between DCA and Comsat, it is informed that the contract contains an assignability clause whereunder if, for any reason, Comsat is unable to provide the circuits directly to DCA the contract may be assigned to one or more of the full service international carriers. ITT Worldcom is prepared to provide the circuits required, assume the contract between DCA and Comsat. negotiate appropriate agreements with connecting carriers or fulfill the terms of Comsat's agreements with the entities operating the terminals in the countries abroad, as Comsat's agent, as those entities may choose. Accordingly. ITT Worldcom is filing this application for authority to lease the necessary circuits from Comsat and provide DCA with its required facilities. 5. ITT Worldcom hereby requests authority to lease from Comsat up to 30 voice half circuits between Hawaii and the projected Intelsat II satellite: up to 10 such circuits for service between Hawaii and Japan, up to 10 such circuits for service between Hawaii and the Republic of the Philippines, and up to 10 such circuits for service between Hawaii and Thailand, and to lease the neces sary connecting facilities in Hawaii from Hawaiian Telephone Co. and to use all of such facilities to provide the DCA with its required leased circuits for alternate voice/data service. 6. ITT Worldcom proposes to lease these facilities from Comsat at a monthly charge of $3,800 per circuit, plus an additional cost of $250 per circuit per month for connecting facilities in Hawaii. 7. ITT Worldcom is prepared and undertakes to cooperate in all respects with the operating entities at the foreign terminals of the satellite circuits. To that end, ITT Worldcom is willing to construct and operate the earth terminal faciliies in the Republic of the Philippines and Thailand or to construct such facilities for operation by the entities within those contries, if desired, with the view toward establishing the service at the time desired by DCA. As the Commission is aware, the facilities in Japan will be operated by Kokusai Denshin Denwa Co., Ltd., and are understood to be presently under construction. ITT Worldcom also is fully prepared to accept the obligations of Comsat with respect to the entities abroad which result from the DCA contract with Comsat and to enter into any other necessary agreements with the entities which operate the terminal facilities in each of the countries abroad, as those entities may desire. 8. ITT Worldcom proposes to furnish to DCA the communication service required over the 30 circuits for which authority is requested here at a charge of $7,100 per month, per half circuit between Hawaii and each of the foreign countries, including the charges for connecting facilities in Hawaii, conditioning and monitoring. The charge proposed is for service between Hawaii and the satellite. Charges for service between the satellite and the respective foreign countries will be those established by the entities in such countries. 9. ITT Worldcom presently operates alternate voice-data circuits via the transpacific cable system between Hawaii and Japan and the Philippines. It is understood that DCA fully intends to maintain cable circuits and that, in addition to the requirement for new capacity, DCA will consider satellites and cables as supplementary and alternative media of communications. The rate proposed therefore is a composite rate to be applied also to such DCA cable circuits between Hawaii on the one hand and Japan, the Philippines, and Thailand on the other hand; that is, $7,100 would be the cable rate from Hawaii to the midpoint in the cables between Hawaii and Japan and Hawaii and the Philippines. It is intended that the rate of $7,100 per month will be established in tariffs to be filed with the Commission in order to permit such rate to become effective upon the commencement of service by the applicant to DCA via the satellite circuits. Charges between such midpoint and the terminal countries will be those established by the operating entities in such countries. 10. It will be observed that the proposed rate represents a significant reduction in the previous charges to DCA for leased cable circuits between Hawaii and each of the three foreign terminals and such reductions which are offered in accordance with section 204 (c) of the Communications Satellite Act of 1962 in order that "any economies made possible by a communications satellite system are appropriately reflected in rates for public communication services," and in compliance with the Commission's decision of July 20, 1966, in docket No. 16058, are possible only if ITT Worldcom is authorized to and does provide the satellite channels desired by the DCA. 11. Accounting will be performed in accordance with part 34 of the Commission's rules and regulations. Wherefore, ITT World Communications, Inc., submits that the present and future public convenience and necessity require a grant of this application. Respectfully submitted. ALFRED A. HENNINGS, Vice President. Hon. ROSEL H. HYDE, ITT WORLD COMMUNICATIONS INC., Chairman, Federal Communications Commission, DEAR CHAIRMAN HYDE: After announcement by the Commission of its determination in the authorized entity proceeding (docket 16058), ITT World Communications, Inc., on June 27, 1966, wrote to inform the Commission of its intention, in light of the Commission's decision that Comsat's role would be that of a carrier's carrier except in unique or exceptional circumstances, to file tariffs establishing new composite rates for alternate voice data leased channels. Such rates would be equally applicable to such channels whether via cable or satellite. It was anticipated that such composite rates would be substantially lower than the existing rates and thereby afford to all users the benefits of the economy of satellite channels as such channels become available. In partial implementation of this intention, in the application filed by ITT Worldcom August 24, 1966, for authorization, pursuant to section 214 of the Communications Act of 1934, as amended, to lease and operate up to 30 channels in the Pacific to serve the needs of the Defense Communications Agency, a new composite rate of $7,100 for the channels between Hawaii on the one hand. and Japan, the Philippines and Thailand on the other hand, was proposed. It was pointed out that this proposed rate, a rate equally applicable to both cable and satellite channels, was based upon ITT Worldcom supplying both satellite and cable channels and would not be possible if Comsat were to supply the satellite channels directly to the DCA. In order that the record may be entirely clear, ITT Worldcom wishes to state that should its August 24 application be approved and service via satellite be instituted as contemplated therein, ITT Worldcom contemplates and fully intends 1. To extend such rates to all customers for such leases, and 2. To establish composite rates at comparably low levels for alternate voice data leases between other points in the Pacific area as service via satellite between such points is established. Very truly yours, ITT WORLD COMMUNICATIONS, INC., Its Attorney. ITT WORLD COMMUNICATIONS INC., Hon. CHET HOLIFIELD, DEAR MR. CHAIRMAN: During the the course of the examination by you and Committee counsel with respect to the statement submitted by me on behalf of ITT World Communications Inc., there was discussion regarding the "assignment clause" included in the contract between Comsat and DCA for 30 Pacific satellite channels. In this discussion I answered affirmatively to Mr. Roback's query “—in effect.— since the assignment is a privilege and an option reserved to the Government. when and where and if the Government decides to exercise that is up to the DCA and not something to be considered by the carrier prior to such a decision to make an assignment." us. I should like to reiterate that the contract has not yet been made available to More importantly however, the point should be made, that regardless of any action of assignment by DCA in the United States, the arrangements which Comsat has entered into abroad, with the governments abroad, may not be con sidered to be assignable by such governments. As a matter of fact, in personal discussions I recently had with a high official of one of these governments' entities, he stated he considered the contract with Comsat to have been entered into on a government-to-government basis, and it was in the nature of a treaty. Again, I very much appreciate the privilege of appearing before your Commitee and, too, of having the opportunity to follow up with this letter. There was brief reference made by me and by Mr. Roback with respect to the Apollo program and the offering of services by Comsat with NASA with respect thereto. I consider it important, just to complete the record, that you should be aware of various correspondence in this connection between my company with NASA, DCA and FCC. Copies of such correspondence are attached hereto. Very truly yours, B. B. TOWER, Mr. EDMOND C. BUCKLEY, ITT WORLD COMMUNICATIONS INC., Director, Office of Tracking and Data Acquisition, Headquarters, National Aeronautics and Space Administration, Washington, D.C. DEAR MR. BUCKLEY: During our recent meeting at which I had the pleasure of describing to you our plans for the implementation of a mid-Atlantic submarine cable system, it was suggested that we explore how this cable network could best serve NASA's growing communications needs. As a result, we are submitting herewith a plan for your consideration which we believe will fully satisfy |