US embassy cable - 05OTTAWA1832

UNCLAS SECTION 01 OF 02 OTTAWA 001832 
 
SIPDIS 
 
STATE WHA/CAN, PM/PP/DTC, OES/O/SAT, EB/CIP/SP, EB/TPP 
 
WHITE HOUSE FOR OSTP (RICHARD RUSSELL) 
 
COMMERCE FOR TECHNOLOGY ADMINISTRATION 
 
COMMERCE FOR INTERNATIONAL TRADE ADMINISTRATION 
 
E.O. 12958: N/A 
TAGS: ETTC, KSTC, BEXP, TSPA, CA 
SUBJECT: Canadian company predicts damage to U.S. 
communications satellite industry-standing from ITAR 
controls 
 
 
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 
curve. 
 
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 
www.uschamber.com/space/policy/exportcontrol. 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, www.house.gov/coxreport/) 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. 
 
Dickson