2-1-2-2 ESTABLISHMENT OF DOMESTIC COMMUNICATIONS--SATELLITE FACILITIES BY NON-GOVERNMENTAL ENTITIES (DOMSAT II), SECOND REPORT & ORDER, 35 FCC 2nd 844 (1972)

III. Determinations on the Issues

D. Alaska, Hawaii and Puerto Rico

35.

We endorse fully the staff recommendation that the advent of service via domestic satellite facilities should be accompanied by an integration of services, and more particularly the charges for such services, between Alaska, Hawaii and Puerto Rico and the contiguous 48 states into the domestic rate pattern. Heretofore considerations of distance, cost and traffic volumes have all combined to indicate that foreign rather than domestic rate and service patterns should be applicable. The relatively high level of charges resulting from these physical factors and cost considerations has inhibited the free flow of communications between the contiguous states and these points to the disadvantage of all of our citizens. It is our considered view that the public interest requires that the distinctions, particularly with respect to level of charges and rate patterns, should be eliminated. As set forth below, the advent of domestic satellite communications with their distance insensitive features provides a sound economic basis for such conclusion.

36.

One of the principal virtues of the satellite technology applied to domestic communications is its characteristic of deemphasizing distance as a cost factor in rate-making. With the availability of domestic satellites for communications between the mainland and Alaska, Hawaii and Puerto Rico, distance should dramatically diminish as an excuse or justification for the historic high-rate treatment that has been accorded to these services. We are now able to look forward to minimizing any distinctions in communications to such points compared to communications among the contiguous states. Thus, with the inauguration of satellite systems to serve the domestic communications requirements of all of the United States, there will be justification for integrating Alaska, Hawaii, and Puerto Rico into the established rate scheme for communications services applicable to the mainland.

37.

Accordingly, it will be our policy to condition any domestic satellite authorization to carriers serving these points upon a requirement that, no later than six months from the issuance of the authorization, such carriers shall submit a specific proposal for revised rates for review and approval of the Commission prior to authorization for the commencement of service. In case of message telephone service (MTT), any such proposal shall give maximum effect to the elimination of overall distance as a major cost factor and should be designed, in specified time phases if necessary, to integrate these three United States points into the uniform mileage rate pattern that now obtains for the contiguous states, with all that such approach implies in terms of nationwide cost averaging and equalizations for interstate rate-making purposes.⁹ We recognize that there may be extraordinary technical or economic factors, e.g., earth station costs and traffic loadings, that may warrant some deviation from this approach or justify a phased implementation of the integrated pattern. However, the carriers involved will be expected to demonstrate and document fully the need for such deviation or phasing in terms of conditions that are singularly relevant to the points involved compared to the contiguous states, and to present the full program with the timing of final implementation.

38.

We recognize that in the case of record services, the problems are more complex in that different carriers provide "overseas" and "domestic services." We do not intend, at this point, to disturb this service pattern. However, we do require that the carriers now providing services submit within the timetable set forth above proposals for the integration of their charges for TELEX, private line and other specialized services into the domestic pattern within the same framework as set forth above, i.e., detailed explanations in economic and technical bases for any proposed deviation or phasing. Should the record carriers fail to do so, we will be required to reconsider our current policy regarding record services between the contiguous states and these three points so as to assure that the policies enunciated here will be implemented. To make implementation possible, we will expect space segment and earth station licensees authorized to serve these overseas points to afford appropriate access to such facilities to the relevant international record carriers for the provision of domestic services.

39.

In light of the foregoing policy determinations, we are further of the view that AT&T should provide MTT services via domestic satellite to these three points, in conjunction with the appropriate local carrier (e.g., Hawaiian Telephone Company, RCA Alascom). If GTE's domestic satellite proposal is authorized and it is shown that the cost of using its facilities would be less than or approximately equivalent to the cost of utilizing AT&T facilities to provide such service between Hawaii and the contiguous states, then we do not foreclose the possibility that GTE might be the designated entity in the case of Hawaii. However, the nationwide cost averaging structure and uniform mileage rate pattern should not be burdened with costs that are greater than necessary in order to integrate these three points, or required to absorb the costs of domestic satellite system facilities proposed by an applicant which lacks the ability to achieve a substantial initial loading.

40.

Moreover, since our most important objective in this area is to minimize the distinctions that have heretofore existed in rates and services to these points as compared to communications among the contiguous states, we think that Alaska, Hawaii and Puerto Rico should have an opportunity to obtain other services via the same earth station antennas and satellites that are used for the provision of MTT services to these points. Thus, whether AT&T proceeds via its own domestic satellite facilities or through a wholesale carrier, we will require that the relevant licensees reserve adequate transponder and earth station capacity for lease to other carriers authorized to provide specialized services to these points in such manner as will nor necessitate another earth station antenna in addition to those used for MTT service. The same requirement will pertain to GTE in the event that it is authorized to provide MTT service to Hawaii by means of domestic satellite facilities. If found necessary to achieve our objective of integrating these three points into domestic rate patterns for all services, we will permit AT&T and/or GTE to provide services other than MTT to one or more of these points. We do not preclude the offering of specialized services to such points by means of independent domestic satellite facilities authorized to other licensees, so long as the public in Alaska, Hawaii and Puerto Rico has the opportunity to take advantage of the potential cost savings in obtaining specialized services on the same satellite system facilities used for MTT.

41.

Finally, we recognize that implementation of the foregoing policies, while of benefit to Alaska, would not satisfy that State's pressing need for improved intrastate communications. Though accommodation of that need is important and the satellite technology appears to offer special promise toward that end, it may prove impracticable for the Commission or the pending carrier applicants to do much to alleviate this problem, at least in the initial generation of satellites. We will require RCA Alascom and any other applicant proposing earth stations in Alaska to submit a detailed plan for intrastate service. We will also require AT&T, or any wholesale carrier serving AT&T, to afford access to its transponder capacity for the purpose of intra-Alaska service, if desired. We will further direct our staff to consult with representatives of the State of Alaska concerning any additional measures we may consider, and reasonably require of the applicants or any domestic satellite licensee, to assist in meeting its intrastate requirements.

42.

With respect to the State of Alaska's request for a 6° separation at 4/6 GHz in that limited and valuable portion of the orbital arc where satellites capable of serving the 50 states can be located, in order to facilitate the use of small, inexpensive earth stations, we note that advances in earth station technology may shortly make it possible to meet the performance specifications needed for 3° separations with earth station antennas of smaller diameter than 30 feet. Moreover, we note the availability of 2 GHz frequencies specifically allocated by the 1971 WARC for educational and instructional television and for demand assigned telephone services in remote areas of the State. Finally, orbital locations for wider spaced 4/6 GHz satellites are available farther west of those than can view the 50 states, where there is less demand for such satellite locations. Thus, it is unnecessary to decide this matter definitively at this time. We stress, however, that we do not rule out the possibility of permitting a 6° separation, if later found necessary for the use of small, inexpensive earth stations in Alaska and in the public interest, all circumstances considered. Paragraph 152a of the staff recommendation concerning orbital arc location assignments is otherwise adopted.

⁹ For example, among other things, such carriers might explore the possibility of "!expanding the last mileage step (presently 1911-3000 miles) to include these points, or of adding an additional mileage step with an appropriate increment in rates.