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Cablegate: Canadian Company Predicts Damage to U.S.

This record is a partial extract of the original cable. The full text of the original cable is not available.

171545Z Jun 05







E.O. 12958: N/A
SUBJECT: Canadian company predicts damage to U.S.
communications satellite industry-standing from ITAR

Sensitive But Unclassified. Proprietary business
information. Handle accordingly.

1. (SBU) Summary: On June 8, Charge, and U.S. Foreign
Commercial Service, POL and ECON staff met with executives
of a Canadian commercial communications satellite operations
and consulting company, Telesat, for a presentation on the
impact of U.S. International Traffic in Arms Regulations
(ITAR) on the commercial satellite industry. Company
officials warn that because of ITAR controls on commercial
satellites and parts, U.S. satellite producers (Telesat is
mostly dependent on U.S. satellites) are destined for
decreasing sales and declining competitiveness in the world
market. End Summary.
2. (SBU) Created in 1969, Telesat is an operator of civilian
communications and Direct Broadcast satellites and is the
largest commercial satellite company in Canada. Telesat has
successfully launched and operated 16 satellites, (6 remain
in operation, and two new satellites are being constructed
for launches in 2005 and 2006). Until recently most of
Telesat's satellites have been American designed and built.
Telesat also provides consulting services to third parties
on satellite procurement, insurance procurement and risk
assessment (the fact that Telesat is a competent non-U.S.
operator of U.S.-made satellites has helped to convince some
international users to purchase U.S.-made satellites, since
they value Telesat's experience and ability to offer
independent and objective advice to end-users.) Telesat is a
wholly owned subsidiary of BCE Inc., Canada's largest
communications company.
3. (SBU) In their presentation, Telesat executives gave
numerous examples of difficulties their company has had with
the ITAR regulations, including the inability to hire an
Iranian-Canadian dual-national who cannot abandon the
nationality of his birthplace because the Iranian government
does not allow abandonment of citizenship. Other
difficulties included the need for special training and
designated areas for operations involving U.S. satellites,
even if equivalent non-U.S. technology was openly handled
elsewhere in the company. Knowing, however, that the
difficulties of a Canadian company might not be a compelling
issue for U.S. decision makers, Telesat executives also
explained how ITAR controls have led to a decrease in the
quality of U.S. satellites, an erosion of market share for
the U.S. satellite industry, and may culminate in a loss of
international standing for the U.S. commercial space
industry as a whole.
4. (SBU) Telesat asserts that the inflexibility and
processing delays inherent in a government oversight program
like ITAR (International Traffic in Arms Regulations) have
led to a decrease in product quality that is damaging the
United States' position as a leader in commercial
communications satellite innovation. Whereas the United
States used to be the leader in the field, according to
Telesat, U.S. satellites are now behind the innovation

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5. (SBU) The company representatives claim that the U.S.
commercial communication satellite industry is losing sales
due to international customer disinclination to deal with
the complexities of ITAR red tape. They believe that
equivalent and sometimes more technologically advanced
satellites are available from Europe and Japan and that many
of their consulting clients are increasingly likely to avoid
U.S. satellites for fear of the delays and inflexibility
inherent in the ITAR process. (Comment: Telesat stated
that the "Canadian exemption" is of little value to them,
since most commercial satellites cost more than the $50
million maximum of the exemption and since the exemption
does not address end-use by non-Canadian companies, which
makes up the majority of their consulting business. End
comment.) The argument that ITAR regulations are costing
U.S. companies sales was familiar to the USG audience, since
it substantially matched the U.S. Chamber of Commerce
position (articulated at htm).

6. (SBU) Telesat claims that over the last ten years it has
seen a marked decline in the quality of U.S.-manufactured
commercial satellites. Company officials attribute this
decline to the loss of the "feedback-loop" between
manufacturers and users. Alluding to the pre-ITAR
conditions of the early 1990s, the company's director of
satellite systems argued that the close technical
relationship between operators and manufacturers provided
vital information sharing and allowed for technical
improvements. According to the presentation, often the
satellite operators grew to be more familiar with the
satellite than the original manufacturers, and sometimes
manufacturers actually turned to the operators for technical
assistance when design problems arose with subsequent
generations of satellites. The operators, with years or
decades of experience with certain satellites, became
another level in the manufacturers' design teams, leading to
improvement of the product. ITAR limits on information
sharing between the manufacturers and operators have, in
this company's estimation, severely damaged this cooperative
relationship between manufacturers and operators, and the
design of the product itself has suffered.

7. (SBU) At the same time, company officials were adamant
that U.S. launch technology should remain regulated under
ITAR control. Launch technology, they stated categorically,
is an area of dual-use threat (as was also stated in the Cox
report, and ITAR controls on
launch technology are necessary to ensure U.S. security.
They contend, however, that the controls on standard
commercial satellites should be removed because that
technology is commercially available outside of the United
States, is based on long-established and widely available
physical principles and engineering techniques and, in fact,
U.S. industry is increasingly no longer at the forefront of
innovation. In their opinion, removing commercial
satellites from regulation under ITAR would allow for better
and more focused control by the Department of State of
critical areas such as U.S. launch technology, while
allowing the U.S. commercial satellite industry to recover
lost ground (or, perhaps, lost space).

8. (SBU) COMMENT: The company representatives, obviously
frustrated by what they see as ineffective and unnecessary
regulations which are damaging their industry, acknowledged
that they didn't expect their presentation to have much
impact on U.S. policy and legislation. Their objective in
meeting with Embassy officials, they said, was to inform.
Embassy Ottawa appreciates that Telesat's view is a piece of
a bigger puzzle and understands that this Canadian company's
concerns may not encompass the entire situation.


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