Mr. NELSON. So, Mr. Roberts, and Mr. Crockett, and Mr. Hollis and Mr. Frey, we welcome you, and we'll just start in the order of the printed agenda. Mr. Roberts.

STATEMENTS OF GEORGE P. ROBERTS, PRESIDENT, CONTEL ASC; BRUCE L. CROCKETT, PRESIDENT, WORLD SYSTEMS DIVISION, COMMUNICATIONS SATELLITE CORP.; REX R. HOLLIS, PRESIDENT, FORD AEROSPACE SATELLITE SERVICES CORP.; AND JAMES H. FREY, GENERAL MANAGER, SPACECRAFT OPERATIONS, ASTRO SPACE DIVISION, GENERAL ELECTRIC CO.

Mr. ROBERTS. Mr. Chairman and distinguished members of the subcommittee, I appreciate the opportunity to be here today to represent Contel ASC and to offer our views on H.R. 3765, the Commercial Space Launch Act Amendments.

As you are aware, our company testified before this subcommittee in September regarding the importance of ensuring the existence of a competitive, domestic, private sector expendable launch vehicle program to fill the void created by the Government's unexpected abandonment of commercial launch services. The current bill is the first meaningful step toward that goal, and Contel ASC supports this effort. We commend Chairman Nelson, Congressman Walker, and all of the Members of Congress who have co-sponsored H.R. 3765 for your vision and leadership. We also want to commend the subcommittee staff for the hard work which is reflected in this legislation.

The introduction and consideration of this measure has been most timely and helpful because, in my judgment, unless we acknowledge the magnitude of the problems facing our commercial space initiative, the 1980's will be viewed as the decade in which the United States lost its preeminence in this area. To date, our Government's policies have not reflected the interdependence of a viable commercial launch industry and a viable commercial space industry. Unless these policies are changed, we will never realize the full potential of the opportunities presented by the use of space for commercial activities.

The only commercial space industry in existence today is the satellite communications industry. A decade of growth in that industry, however, stands threatened by the disastrous economic consequences of our national space policies. Some well-known facts will, I believe, make clear the impact of escalating launch costs, insurance premiums, and other unacceptable financial risks on the industry of which I am a part.

In 1983, 21 companies filed applications with the FCC for new satellite services, and 11 companies were provided with construction and launch authorizations. Some 18 satellites were constructed and launched, and the industry was approaching maturity. However, there has not been a single domestic U.S. communications satellite construction contract awarded since July 1985, and to my knowledge, none of the current licensees have even prepared a request for proposal or invested any significant capital in the acquisition of new satellite systems.

This reluctance on the part of entrepreneurs and current satellite operating companies to pursue future communications satellite

business has, I believe, a simple cause: prohibitive costs have erased the potential for any reasonable return on investment. My company has over the last two years experienced increases in the costs associated with launching satellites that run into the tens of millions of dollars. These increased costs simply cannot be passed through to our customers, and unless these unanticipated costs are addressed, our ability and the ability of our associates in the satellite communications industry to compete with other technologies is doubtful. Without a creative approach to this problem through changes in Government policies, and the enactment of new legislation, I believe that there will be no new commercial space industries, and the health of the sole existing entrant in the field—satellite communications-will be placed in jeopardy.

The introduction of the Commercial Space Launch Act Amendments gave us our first real hope that the commercial space industry would be rebuilt. The provisions of the bill which establish means by which the risks associated with launch activities may be shared and provide some protection against the preemption of satellite launches are important.

In addition, the bill encourages companies such as Contel ASC to seriously consider utilizing a Ŭ.S. ELV launch. The section which provides incentives to satellite owners whose contracts were not performed by NASA is helpful to us because, in return for contracting for an ELV launch, we may obtain third-party liability insurance for the price we had contracted to pay under the terms of our launch services agreement with NASA. That section also provides that steps will be taken to ensure that eligible satellites receive priority status for launch from United States launch sites.

I do not, however, want to give you the impression that we believe that H.R. 3765, as introduced, is completely responsive to our needs. I will take a moment to reacquaint you with Contel ASC and its business and to outline its relationship to the current bill as the owner of an eligible satellite.

As you know, Contel ASC is a telecommunications common carrier that operates a network comprised of hundreds of satellite Earth stations which serve industry and Government. Our Earth stations depend on the availability of satellite transponders in geosynchronous orbit to provide the essential connectivity that forms the Contel ASC custom-tailored communication networks.

In August 1984, Contel ASC signed a launch services agreement with NASA which obligated NASA to launch two ASC telecommunication satellites, ASC-1 and ASC-2. ASC-1 was launched by the shuttle on August 27, 1985. Prior to October 1986, ASC-2 had been manifested by NASA on the shuttle with a firm launch date of January 27, 1987.

In January 1986, the Challenger disaster took place. Following Challenger, we received assurances that the Government did not intend to abandon its obligation to Contel ASC. But in August, 1986, the President issued a policy statement indicating that the Government would no longer be in the business of launching commercial satellites and encouraging the establishment of the private ELV industry. In October 1986, NASA released the first space shuttle manifest following the loss of the Challenger which deleted ASC-2 from the list of satellites scheduled for shuttle launch. Also

in October NASA advised Contel ASC that NASA would not be providing launch services of any kind for ASC-2. The Government's failure to perform under its launch services agreement has left Contel ASC severely damaged to the extent of millions of dollars.

H.R. 3765 is a positive initiative taken to ensure the future of the commercial space industry. However, before the future is discussed, it is imperative that the Government make whole those satellite owners such as Contel ASC whose shuttle launch contracts were repudiated by NASA in 1986. In signing launch services agreements with companies such as Contel ASC, the Government made a binding commitment. It promised to ensure our access to space if we proceeded to make the investment in the satellite and prepay the associated launch costs. Contel ASC has fulfilled its part of the bargain.

Even after the Challenger accident, the Government continued to assure us that they would honor their contractual commitment to satisfy our launch requirements, whether by shuttle or a special procurement of expendable launch vehicles. On the basis of these continued assurances, we made no further contingency plans and continued to keep our faith in the Government. Unfortunately, our faith was misplaced. This action has cost Contel ASC and others in the satellite communications industry staggering sums of money. Today, companies such as Contel ASC have invested hundreds of millions of dollars in the design, development and acquisition of communication satellites. Some of these satellites, such as our ASC-2, have been completed and are currently in storage, with no reasonable likelihood of obtaining a timely and affordable launch. As I indicated a few moments ago, H.R. 3765 provides necessary incentives to satellite owners such as Contel ASC. However, the bill is inadequate in its recognition of the huge increase in launch costs which has occurred since our LSAs with NASA were executed. Launch costs have more than doubled during the last two years. But the current bill provides only that the United States will not require payment for use of its launch property and services in connection with the launch of an eligible satellite. This partial credit compensates for only a fraction of the total increased launch costs that satellite owners now face.

Before companies like Contel ASC can fully commit to using U.S. ELVS under the current U.S. Government license program, we must be made whole for the overwhelming loss sustained due to NASA's breach of our LSAs. I am here today to ask that the bill be amended to provide us a voucher to cover increased launch costs for our eligible satellite.

Contel ASC supports Congressman Nelson's bill, but I suggest that the legislation contain a provision to fully indemnify those of us who have been severely damaged by changes in the administration's policy and by the Government's failure to honor its obligations under our previous launch agreements. I believe these recommended changes are essential to restore confidence in this Nation's space policy and program and will also strongly support the viability of the U.S. commercial ELV industry.

Thank you for the opportunity to appear before you today. [The prepared statement of Mr. Roberts follows:]

Subcommittee on Space Science and Applications
Committee on Science Space and Technology
United States House of Representatives

Mr. Chairman and Distinguished Members of the Subcommittee:

I appreciate the opportunity to be here today to represent Contel ASC and to offer our views on H.R. 3765, the Commercial Space Launch Act Amendments. As you are aware, our company testified before this Subcommittee in September regarding the importance of ensuring the existence of a competitive, domestic, private sector Expendable Launch Vehicle (ELV) program to fill the void created by the government's unexpected abandonment of commercial launch services. The current bill is the first meaningful step toward that goal, and Contel ASC supports this effort. We commend Chairman Nelson, Congressman Walker, and all of the members of Congress who have co-sponsored H.R. 3765 for your vision and leadership. We also want to commend the subcommittee staff for the hard work which is reflected in this legislation.

The introduction and consideration of this measure has been most timely and helpful because, in my judgment, unless we acknowledge the magnitude of the problems facing our commercial space initiative, the 1980's will be viewed as the decade in which the United States lost it preeminence in this area. To date, our government's policies have not reflected the interdependence of a viable commercial launch industry and a viable commercial space industry. Unless these policies are changed, we will never realize the full potential of the opportunities presented by the use of space for commercial activities.

The only commercial space industry in existence today is the satellite communications industry. A decade of growth in that industry, however, stands threatened by the disastrous economic consequences of our national space policies. Some well known facts will, I believe, make clear the impact of escalating launch

costs, insurance premiums, and other unacceptable financial risks on the industry of which I am a part. In 1983, 23 companies filed applications with the FCC for new satellite services, and 14 companies were provided with construction and launch authorizations. Some 16 satellites were constructed and launched, and the industry was approaching maturity. However, there has not been a single domestic U.S. communications satellite construction contract awarded since July, 1985, and to my knowledge, none of the current licensees have even prepared a request for proposal or invested any significant capital in the acquisition of new satellite systems.

This reluctance on the part of entrepreneurs and current satellite operating companies to pursue future communications satellite business has, I believe, a simple cause: prohibitive costs have erased the potential for any reasonable return on investment. My company has over the last two years, experienced increases in the costs associated with launching satellites that run into the tens of millions of dollars. These increased costs simply cannot be passed through to our customers, and unless these costs are addressed, our ability, and the ability of our associates in the satellite communications industry to compete with other technologies is doubtful. Without a creative approach to this problem through changes in government policies and the enactment of new legislation, I believe that there will be no new commercial space industries, and that the health of the sole existing entrant in the field satellite communicationswill be placed in jeopardy.

The introduction of the Commercial Space Launch Act Amendments gave us our first real hope that the commercial space industry would be rebuilt. The provisions of the bill which establish means by which the risks associated with launch activities may be shared, and provide some protection against the preemption of satellite launches are important. In addition, the bill encourages companies such as Contel ASC to seriously consider utilizing a U.S. ELV launch. The section which provides incentives to satellite owners whose contracts were not performed by NASA is helpful to us because in return for contracting for an ELV launch, we may obtain third-party liability insurance for the price we had contracted to pay under the terms of our Launch Services Agreement with NASA. That section also provides that steps will be taken to ensure that eligible satellites receive priority status for launch from United States launch sites.

I do not, however, want to give you the impression that we believe that H.R. 3765, as introduced, is completely responsive to our needs. I will take a moment to reacquaint you with Contel ASC and its business, and to outline its relationship to the current bill as the owner of an "eligible satellite."