(c) WESTERN ELECTRIC CO., INC., New York, N.Y. FEDERAL COMMUNICATIONS COMMISSION, (Attention of Mr. H. I. Romnes, president). GENTLEMEN: Thank you for your reply of July 14 to the Commission's letter of July 7 relative to your company's level of earnings and the prices charged the Bell companies. I note that you are reviewing the current price situation and that after this review is completed you will communicate with the Commission. DEAR MR. CHAIRMAN: As discussed with Commissioner Hyde at your suggestion, the review of current prices referred to in my letter of July 14 has been completed and as a result we are reducing prices to Bell companies on a wide range of products of our manufacture effective July 1, 1961. These reductions, aggregating over $26 million on an annual basis at the current level of business, are in addition to recent reductions of about $7 million in prices of exchange cable. Such reductions are possible in the face of increases in labor rates and other costs only because of the continuing high level of operations and our constant emphasis on cost reduction and increased efficiency. Western's prices are now at the lowest level reached during the past 10 years and about 10 percent lower than they were in 1950. We shall, of course, furnish any detailed information about these changes that the Commission may request. DEAR MR. ROMNES: This will acknowledge receipt of your letter of July 27, 1961, advising of your decision to reduce your prices on products furnished Bell companies in the amount of $26 million. We appreciate your prompt consideration of the matters raised in our letter of July 7, 1961. We are analyzing the effects of this reduction and will communicate with you further in connection therewith. Sincerely yours, NEWTON N. MINOW, Chairman. EXHIBIT XXV LETTER FROM HERBERT TROTTER, JR., PRESIDENT, GENERAL TELEPHONE & ELECTRONICS LABORATORIES, NEW YORK, N.Y., COMMENTING ON TESTIMONY OF COMMISSIONER CRAVEN OF THE FCC, RELATING TO THE USE OF SATELLITES FOR DOMESTIC COMMUNICATIONS GENERAL TELEPHONE & ELECTRONICS LABORATORIES, INC., Hon. RUSSELL B. LONG, New York, N.Y., August 23, 1961. SIR: In reading over the testimony presented in the hearing held before the Subcommittee on Monopoly of the Select Committee on Small Business on August 11, 1961, there are several places in which I think the questions you asked were misinterpreted, and, therefore, the technical information given was not pertinent to the question to which you were attempting to get an answer. On pages 809 and 831 through 857, Commissioner Craven indicated he believed that satellites would not be used for domestic communications. He cited three reasons (see pp. 430-440) : (1) That it would cost more to provide circuits through the satellite than through present ground communications. (2) That the radio frequency spectrum was already crowded, and that a distance of about 75 miles would be required between a satellite base and a ground microwave link to avoid radio interference; and (3) That if domestic calls were routed over the satellite, the satellite would not be able to handle oversea business. I believe in all of these reasons that Commissioner Craven had in mind only the low random orbit satellite, because on all of these points such a system is subject to the limitations he described. Since the antennas in a low random orbit system have to sweep across the sky to stay locked on the moving satellite, they naturally cause more interference with ground communications than is the case with stationary antennas located in such a way that the energy radiated from the sides can be greatly reduced. Unlike the low random orbit system, in the high altitude system, by putting several satellites into stationary orbit-say 10 or 15 degrees apart-the same radio frequencies can be reused, and, therefore, additional channels secured without use of additional radio frequencies. Also, for the same number of telephone circuits the stationary satellite uses a much smaller amount of the radio frequencies spectrum than the low random orbit system. The technical results of our studies indicate that with the proper ground switching and modulation techniques, the channels can be used where they are needed as the daylight hours move westward around the earth. We would expect that with foreseeable technical developments the high altitude stationary satellite will be a real challenge to domestic long-line communication using present methods of transmission. On page 843, when Commissioner Craven was discussing the "Advent type" satellite, he interpreted this to mean a military communication type satellite, whereas I thing you were referring to "Advent type" as a stationary satellite for common carrier communications. It is important to make a distinction between requirements for secure military communications and for economical commercial communication. The two are not compatible; and we feel, therefore, that there should be two independent systems. The military Advent system is the right approach for general military use, and a satellite in similar position, but with a different kind of electronic package, would serve the commercial use and not have the problems which Commissioner Craven attributed to an "Advent type" satellite. As stated in our testimony before you, one satellite placed over the equator at 22° west longitude would interconnect 91.8% of the telephones of the world. The important point is that, rather than go through a long evolutionary stage to arrive at the proper type of satellites, we have advanced both in electronics and space technology to the point where we can design the proper system now and can move with rapidity toward accomplishing this in logical steps. In other words, with our technical background we are in a position now to play professional major league baseball-we don't have to start in the "little league" and work up. In our testimony before you on August 3, 1961, we gave the committee a copy of our Petition for Reconsideration of the FCC's Supplemental Notice of Inquiry dated July 25, 1961, in docket 14024. To bring the matter down to date, we are enclosing, for your information, copies of our replies to oppositions filed by American Cable & Radio Corp. and A.T. & T. to our petition. Sincerely yours, HERBERT TROTTER, Jr. Senator LONG. I would like to hear from Dr. E. C. Welsh, Executive Secretary of the National Aeronautics and Space Council. Dr. Welsh, it is a pleasure to welcome you here. I didn't know that you had disassociated yourself from Senator Symington, but I know that you are in pretty good company down there in the Executive Offices of the President. STATEMENT OF DR. E. C. WELSH, EXECUTIVE SECRETARY OF THE NATIONAL AERONAUTICS AND SPACE COUNCIL, WASHINGTON, D.C. Dr. WELSH. Thank you, sir. Mr. GORDON. You might be interested to know, Mr. Chairman, that during the TNEC days, Dr. Welsh was the author of TNEC monograph, No. 10, "Industrial Concentration and the Tariff." Isn't that correct, Dr. Welsh? Dr. WELSH. Yes, I admit to that, sir. Senator LONG. I could tell by Dr. Welsh's scarcity of hair that he has given quite a bit of thought to some problems, I did not know that that was one of them. Dr. WELSH. That is only one of them, sir. I might add to the introduction that I have had some other experiences in attempting to get more competition and to eliminate monopoly. For example, I was the head of the Antitrust and Cartels Division in Japan for 311⁄2 years, under General MacArthur, with responsibility for breaking up the family monopolies there. And we did accomplish something. Senator LONG. You accomplished a lot. Dr. WELSH. And they had been having quite a bit of difficulty in getting some of those cartels put back together again. Senator LONG. You may proceed. Dr. WELSH. Mr. Chairman, it is a pleasure to respond to your invitation to appear before this committee. By way of introduction, I mention that my active interest in a healthy, competitive private enterprise system predates substantially my interest in space, although I find the latter can and should be consonant with, and a stimulus to, the former. You indicated that it would be of value in your deliberations if I were prepared to "discuss the role of the Space Council in developing policy for communications satellites." Consequently, I shall attempt to outline briefly the steps taken and procedures followed in preparing recommendations to the President on this important subject. FUNCTIONS OF THE SPACE COUNCIL For convenient reference, I quote the pertinent portions of the National Aeronautics and Space Act as amended. Section 201 of that act reads in part as follows: (e) It shall be the function of the Council to advise and assist the President, as he may request, with respect to the performance of functions in the aeronautics and space field, including the following functions: (1) Survey all significant aeronautical and space activities, including the policies, plans, programs, and accomplishments of all departments and agencies of the United States engaged in such activities; (2) Develop a comprehensive program of aeronautical and space activties to be conducted by departments and agencies of the United States; (3) designate and fix responsibility for the direction of major aeronautical and space activities; (4) provide for effective cooperation among all departments and agencies of the United States engaged in aeronautical and space activities, and specify, in any case in which primary responsibility for any category of aeronautical and space activities has been assigned to any department or agency, which of those activities may be carried on concurrently by other departments or agencies; and (5) resolve differences arising among departments and agencies of the United States with respect to aeronautical and space activities under this act, including differences as to whether a particular project is an aeronautical and space activity. As just noted, the controlling language calls for the Space Council to advise and assist the President, as he may request PRESIDENT'S LETTER OF JUNE 15 Accordingly, on June 15, the President asked the Vice President to have— the Space Council undertake to make the necessary studies and Governmentwide policy recommendations for bringing into optimum use at the earliest practicable time operational communications satellites. As the chairman pleases, I can either read the entire letter or present it for the record. I have it here for the record, Mr. Chairman, would that be adequate? Senator LONG. Yes. Somewhere along the line you are going to give us the gist of what is in it? Dr. WELSH. Yes, sir. Or I can do it at this time. It is a very short letter, and I can read it, if you prefer, sir. This is a letter, dated June 15, from the President to the Vice President (exhibit XXVI): I will appreciate your having the Space Council undertake to make the necessary studies and Government-wide policy recommendations for bringing into optimum use at the earliest practicable time operational communications satellites. The Federal agencies concerned will provide every assistance which you may request. I am anxious that this new technology be applied to serve the rapidly expanding communications needs of this and other nations on a global basis, giving particular attention to those of this hemisphere and newly developing nations throughout the world. Such communications needs include both governmental and nongovernmental requirements. Throughout this analysis, public interest objectives should be given the highest priority. Policy proposals should include recommendations not only as to the nature and diversity of ownership and operation of communications systems and parts thereof, but also proposed objectives. Effective utilization of both our public and private resources needs to be assured, as well as close cooperation with other countries and their communications systems. Continuing coordination of the governmental agencies responsible for regulatory, space, military, and other aspects of this field is essential. I will appreciate receiving recommendations from you on these and other matters bearing on the development and use of communications satellites just as promptly as possible. Research and development should proceed at an accelerated pace while this study is in progress. It is signed by the President of the United States. I might point out, Mr. Chairman, that the characteristics of the space communications problems are such as to have caused reasonable expectation that it might come to the Council's attention. While testifying before the Senate Aeronautical and Space Sciences Committee on April 19, I was asked to indicate what type of problems I anticipated would be the concern of the Space Council. My response was in part as follows: A specific illustration would be those problems which cut across agency lines, such as the communications satellite problem. That would be the type of item which might come up for consideration, so that specific recommendations would be available to the President. Shortly thereafter, at the President's request and under the Vice President's chairmanship, we undertook to coordinate and assist in the development of the across-the-board space program which the President sent to the Congress on May 25. In that message, it will be recalled, he asked for a substantial increase in funds to accelerate the development and operation of a communications satellite system. Even prior to the receipt of the June 15 letter, I attended an FCC hearing on communication satellites which was referred to by the previous witness; contacted NASA, Defense, and State on specific aspects of the problem; and held several preliminary meetings with staff representatives from a number of the interested agencies, as well as with the President's Scientific Adviser. The Vice President was kept fully informed of these activities. COUNCIL STAFF PROCEDURE Following is a brief outline of the steps taken in carrying out the President's request, which was expressed in the letter which I read into the record. 1. Prior to its public release, the President's letter of June 15 was distributed to the heads of interested agencies. 2. Representatives of the following agencies were invited to meet with me to work out draft policy language; State, Defense, NASA, AEC, Justice, FCC, OCDM Bureau of the Budget, and the Office of the President's Scientific Adviser. 3. Various policy questions were distributed from time to time so that the participants would be ready to discuss them and suggest language at the next meeting. After a series of such meetings, I drafted a working paper, which reflected significant suggestions and proposals previously received from the staff participants. During this period, suggestions received from various non-Government sources were also studied. 4. On July 5, a meeting was held, at which time a word-by-word examination of the draft working paper was made. 5. Modifications in that paper were adopted by unanimous agreement and the paper was circulated for internal coordination in the respective staffs. A few additional editorial changes were adopted as a result of this reexamination. 6. A formal Space Council meeting was held on July 14. The Vice President presided. In addition to the statutory members of the Council, those who attended and participated in the meeting included the Attorney General, the Chairman of the FCC, and the Deputy Director of OCDM. 7. Unanimous agreement was reached in the Council meeting. On instruction from the Vice President, the recommendations were delivered to the President. 8. The President evaluated the recommendations and made a public announcement on the policy on July 25.2 The executive secretary has been requested to work with the interested agencies in order to maintain a continuing followup on communi H. Doc. 174. "Urgent National Needs," address of the President of the United States delivered before a joint session of the Senate and the House of Representatives, May 25, 1961 (87th Cong., 1st sess.). 2 See exhibit I, p. 16. |