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INCREASE IN TELEPHONE TRAFFIC

Mr. MAHON. What is the basis for estimating that the telephone traffic will increase over 1960 by 30 percent?

General Cook. Our records show this trend.

Mr. MAHON. What is your comment on it?

Mr. WEST. For 1958, for example, sir, the increase was 10.9 percent. For 1959, it was 26.4 percent.

For 1960, it was 23.3.

For 1961, we estimate about 17 percent.

Since we have new facilities in being in 1962, the facilities that General Cook just spoke of, we feel reasonable in assuming that the increased traffic will go way up, higher than in the past.

Mr. MAHON. Is that Government traffic?

Mr. WEST. Both, sir.

Mr. MAHON. Or nongovernment?

Mr. WEST. Both, sir, are increasing.

Mr. ANDREWS. General, what will the total receipts for the operation of the system be in 1962? What do you estimate?

General Cook. We are estimating $5 million.

Mr. ANDREWS. And you are requesting $6.3 million for operation? General CoоK. Yes, sir.

Mr. ANDREWS. So you operate at about a $1.3 million loss?

General CoоK. The loss, sir, is not $1.3 million.

Mr. ANDREWS. What did you say the receipts would be?

General Cook. $5 million.

Mr. ANDREWS. And the cost of operation, $6.3 million?

General Cook. Yes, sir. In addition to that

Mr. ANDREWS. That makes a $1.3 million loss, according to my arithmetic.

VALUE OF FREE SERVICE TO GOVERNMENT AGENCIES

General Cook. We do provide free service to all Government agencies in Alaska.

Mr. ANDREWS. What do you estimate that to be worth? Do you get reimbursed for any of it?

General Cook. No, sir.

Mr. ANDREWS. So far as you are concerned, you have a $1.3 million loss?

General Cook. That is correct.

Mr. ANDREWS. But you do furnish service to other Government agencies?

General Cook. All Government agencies; yes, sir.

Mr. ANDREWS. Could you supply for the record what the cost would be to those agencies if not furnished free by your agency? General Cook. That will be supplied for the record.

(The information to be supplied follows:)

Value of communications services furnished free to Government agencies for

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fiscal year 1960

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1 Of the total amount of free services furnished to over 50 different Government agencies in fiscal year 1960, some $2,356,294 was for the Department of Defense. The remaining $685,260 covered the civilian agencies of the Government, including the Congress.

PERSONNEL BENEFITS

Mr. ANDREWS. I notice quite an increase here for personnel benefits. You show $309,000 for 1962 against $273,000 for 1961.

Could you explain that for us briefly?

General Cook. There is $206,000 of this for personnel compensation, and the benefits for 20 man-years which result from 25 additional telephone operators and 9 man-years of telephone operators hired in fiscal year 1961.

Mr. ANDREWS. Is this amount for salaries, or for fringe benefits? General CoоK. Well, both, sir.

Mr. ANDREWS. Why would this item not be under the "Personnel compensation" item, No. 11? I am looking at page 3 of the justifications.

Item 11, total personnel compensation, $4,315,000.

Then under "Obligations," 12, you have "Personnel benefits," $309,000, an increase over the $273,000 for fiscal 1961.

General CoоK. Such items as the Government's contribution to health insurance, civil service retirement, social security— Mr. ANDREWS. It is not salary?

General Cook. No, sir.

INCREASE IN OTHER SERVICE COSTS

Mr. ANDREWS. Down further under item 25, "Other services," you show a $101,000 increase. You are requesting $289,000 for 1962 as against $188,000 for 1961. Why that substantial increase for that obligation, "Other services"? What are they?

General Cook. We have such things as travel following the contractual completion-the civilian employees get accrued leave at the end of their 2-year contract.

Mr. FLOOD. Are you applying the same rigid yardstick on travel that we are beating over the head of the other services? Has it trickled up there?

General Cook. Yes, sir.

Mr. FLOOD. You know what is going on as far as this committee is concerned on travel. Have you got the word?

General Cook. No, sir.

Mr. FLOOD. General Duff, you better pass it.

Mr. ANDREWS. All this represents is terminal leave travel. That is the travel you are talking about?

General Cook. Yes. I thought Mr. Flood was asking about dependents' travel to and from overseas.

Mr. ANDREWS. How long does a man stay there working with you before he is entitled to come back to the mainland?

General Cook. Two years.

Mr. ANDREWS. When he comes back, does he come back for 60 days. at Government expense?

General Cook. Yes, sir.

Mr. ANDREWS. And then he returns to his job?

General Cook. Yes, sir.

Mr. FLOOD. Are these contract employees?

General Cook. Civil service, sir.

AVERAGE SALARY AND COST OF LIVING ALLOWANCE

Mr. ANDREWS. I notice your average GS salary is $4,885.
General Cook. Yes, sir.

Mr. ANDREWS. Is not the cost of living up in Alaska much higher than on the mainland?

General Cook. I do not know what is in that figure. I do not know if that is included in the $4,885.

Mr. ANDREWS. What do they get, 10 or 25 percent additional?
General Cook. Twenty-five percent.

Mr. ANDREWS. I wish you would find out whether or not this $4,885 average GS salary is the total, or whether there are any fringe benefits added to that.

General Cook. Yes, sir.

Mr. ANDREWS. Also in connection with your next average salary of ungraded positions, where you show $8,703.

General Cook. It is not considered in the ungraded, sir.

Mr. FORD. In fiscal 1961 in your average GS salary, the figure is $4.874.

General Cook. Yes, sir.

Mr. FORD. Did I understand correctly there is a 25 percent cost-ofliving allowance for those people who live in this area?

General Cook. Yes, sir.

Mr. FORD. And you are not certain this figure set forth on page 4, or the personnel summary, includes the 25-percent increase?

General Cook. That is correct. I will supply that for the record. (The information to be supplied follows:)

Average salaries

Average GS salary.

Average salary of ungraded positions___

$4,885 8, 703

The average GS salary of $4,885 does not include the 25 percent differential for overseas or any of the fringe benefits.

The average ungraded salary of $8,703 does not include any fringe benefits. Ungraded employees' basic salary includes allowances for the increased cost of living.

VALUE OF SYSTEM AND PROPOSED SALE

Mr. FLOOD. Well, with the help of God, if I live long enough, this thing will never show up here. Sixty years we have been after this

one.

Why do you not give this to A. T. & T.? They have outsitted you so far. They are still trying to outwait you on this thing. It has been lace-curtained. Now we are goldplating this operation.

Just what does A. T. & T. want us to do before you give this to them?

What do you think would be a good figure on this, a nice round, fat, educated guess today?

General Cook. I would say a ball park figure, the worth of the systems, cost to us, is $150 million.

Mr. FLOOD. Will you give it to me for 5 years ago, 10 years ago, and 15 years ago, not now but for the record?

General Cook. Yes, sir.

(The information to be supplied follows:)

Government investment in the "long lines" Alaskan Communication System

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These figures represent the current investment in the facilities operated by the Federal Aviation Administration, the Department of Air Force "White Alice" and the Alaska Communication System which are proposed for disposal.

Mr. FLOOD. Just watch this grow and grow and grow and grow. Then finally we will say to A. T. & T., here it is.

This is the potential of one of the greatest scandals in American political history. This is a joke.

Mr. ANDREWS. Is A. T. & T. trying to buy it out now?

Mr. FLOOD. Certainly not.

If we wait 5 or 10 more years, everything will be in there, including hot and cold water. As soon as A. T. & T. is satisfied the Government puts in everything A. T. & T. thinks should be put in this thing, some day they will offer it and they will take it. Happy New Year. This has been going on for a generation.

You remember, Mr. Sikes, you were chairman of the Army Panel when we first started on this.

Mr. SIKES. We were prepared to sell it several years ago. I understand that is not the problem. I understand legislation to permit its sale has not been approved.

Mr. MAHON. May I interrupt?

You have heard Mr. Flood, Mr. West. You have been in this business for quite some time.

What is your plain, unvarnished, unrestrained, honest opinion about the observations which Mr. Flood has made here as to the sale? We will let you have the floor now.

Mr. WEST. You sort of put me on the spot, sir.

Mr. MAHON. You are paid to be on the spot.

Mr. WEST. In my personal opinion, we are not lace-curtaining it,

sir.

Mr. FLOOD. You do not know what I mean by "lace curtain."

Mr. MAHON. Let's let the man talk.

Mr. WEST. I am taking that literally, sir.

Mr. MAHON. We will recognize you for 2 or 3 minutes without interruption.

POSSIBILITIES OF SALE AND COMMERCIAL OPERATION

Mr. WEST. I do not believe the Government is lace-curtaining the Alaskan Communication System, the one you see on the map. They are building communications facilities primarily for military purposes. The green lines are White Alice and the crosshatched lines are primarily for military purposes.

Incidentally, they can also provide commercial communication to you, or I, or any other American citizen.

I do not believe if anyone bought it today it would pay for itself, assuming we had the authority to sell it. If Congress wants it sold, we will sell it. If not, we will not sell it. It is up to Congress to determine whether it should be sold or not.

The Army has proposed to sell the Alaska Communication System, the part we are talking about here, the red lines, to my personal knowledge for 27 years. We have never gotten the authority to sell it.

Under the rules and regulations we live under, we do not believe we can sell it without specific authorization of the Congress.

Mr. WEAVER. What do the red lines indicate, the part that they wanted to sell?

Mr. WEST. That is the part known as the Alaska Communication System. The entire system we are talking about is not only the Alaska Communication System, but it is the Air Force White Alice System as well as the Air Force BMEWS System as well as the FAA point-to-point communication system for the commercial airlines. We are not talking about selling the Alaska Railroad communications between Anchorage and Fairbanks at all.

The only way is if the Congress wants it sold, and I say this advisedly, or the majority of the Congress wants it sold, it can be sold, but in my personal opinion it will require an increase in rates in order to make the system pay for itself. The military will still be the predominant user of the system dollarwise.

Mr. MAHON. Do you think it would be in the overall best interests of the Government to sell the system?

Mr. WEST. Yes, sir; I do.

Mr. MAHON. Why?

Mr. WEST. Because it is my personal opinion that commercial enterprise can do it better and cheaper.

We have four different Government agencies running the system in Alaska now. We should have one agency running the entire system.

Mr. MAHON. Who are the four?

Mr. WEST. The Department of the Air Force, the Department of the Army, the FAA, and the Alaska Railroad of the Department of the Interior.

Mr. MAHON. Now General Cook, what is your response to these specific points covered by Mr. West?

First, say how long you have been associated with this operation, General Cook. The Alaska Communication System?

Mr. MAHON. Yes.

General Cook. Approximately 2 years.

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