(Discussion off the record.)

Senator KEFAUVER. We will allow a few questions if you have time

to spare.

Mr. CELLER. Yes, sir. That is all right. But I have an appointment with the President at 11 o'clock, if you will bear that in mind when asking questions.

I want to say that it is always good to be associated with you, Mr. Chairman. We have been working together for a great many years on these matters, and I hope we will be able to work together for many more years to come.

Senator KEFAUVER. I thank you very much.

One final question, then: Who is going to own the satellite or satellites that are put in orbit for the purpose of communications? Mr. CELLER. The corporation would own them.

Senator KEFAUVER. Can the corporation own an object in space? There is no body of international law as of yet established. Would it be better to have a sovereign United States own the satellites?

Mr. CELLER. What about the cables under the sea? They are owned by a private corporation.

Senator KEFAUVER. I thought we had international law applicable to these. I had in mind the

Mr. CELLER. There are international agreements between countries where the terminus of the cables are and with reference to communications over those cables. There are many numbers of international agreements, and I suppose that would be operative, too, when it comes to space.

Senator KEFAUVER. We haven't reached into national agreements as to space, and the only international body that has resolved on the subject that I know of is the General Assembly of the U.N., in which in rather general language they recommend that the solar body be under the control of the sovereign nation and not the corporations.

Mr. CELLER. That is true. It is hoped that they will get after it and work on these agreements more assiduously than heretofore. They have been a little laggard and I think if we pass something along these lines, we might spur them to more activity in that regard.

Senator KEFAUVER. Even if the sovereign government owned the satellite, the ground stations would still be owned by the corporation under your bill.

Mr. CELLER. Under my bill the ground stations would be owned and they could be operated by the corporation, but the communications carriers would be privileged to lease them. Under the modified Senate bill they just ipso facto operate and own these stations, and I think that is one of the gimmicks I spoke of. It must be carefully examined. I don't think they should own them. The corporation should own them and then the carriers could have the privilege of leasing.

Senator KEFAUVER. What would you think about Government ownership of the satellite and the corporation owning the ground stations? Mr. CELLER. Well

Senator KEFAUVER. And in that way if the Government wanted to go to a better satellite, it could do so without

Mr. CELLER. Well, I haven't thought about that, but at first blush it doesn't seem to be utterly inconsistent with the corporation that I

have set up here, this private corporation publicly owned. It might be a solution. I don't know. I am not certain about that. It might be a good way out.

Senator KEFAUVER. Mr. Chumbris raises the question, where would the Government get the revenue to put the satellite up? I think the Government would get tremendous revenues by leasing the channels on the satellite to the communications carriers. It would be very valuable, that is, in the event the Government owned the satellite, whether it is a high orbit satellite or whether it is several low ones. The revenue from leasing the channels on the satellite, which might run up to 1,200 channels, would be very valuable to the Government, would pay back some of the

Mr. CELLER. There is no question about that, but under my provision I think I provide that the costs of the satellite shall be a matter of reimbursement by the company to the Government.

Senator KEFAUVER. All right. Really I expect, Congressman Celler, to prevent any delay in your getting to the White House, we had better

Mr. CELLER. Yes. I think I have to be going. Forgive me for departing now, but I have to leave.

Senator KEFAUVER. Judge Loevinger and Mr. Langstaff of the National Telephone Cooperative Association will testify this afternoon. We will stand in recess until 3 o'clock.

Thank you very much, Congressman.

Mr. CELLER. Thank you very much, and I thank the junior Senators, too. [Laughter.]

(Whereupon, at 10:45 a.m., the subcommittee recessed to reconvene at 3 p.m. this same day.)

AFTERNOON SESSION

(Present: Senator Kefauver (presiding).)

Senator KEFAUVER. The comimttee will come to order.

We appreciate very much, as we always do, the cooperation, in consideration of the committee's antitrust and monopoly problems, of the distinguished Assisstant Attorney General of the Antitrust Division of the Department of Justice, Lee Loevinger. It is very thoughtful and helpful of you, Mr. Loevinger, to give us and other committees of the Congress so much of your time and though in your very busy schedule.

You have with you today Mr. John Duffner, Mr. John Lyons, and Mr. John James.

We are, as you are well aware, interested very greatly in the monopoly, antitrust, and concentration problems in the bills pertaining to the establishment and control of the communications satellite system.

The latest bill we have, in addition to the ones filed by other Senators, by the administration originally, by Senator Kerr originally, and by two Congressmen, is the so-called compromise bill, which was filed on April 2, 1962.

You have a statement, Judge Loevinger. And then we will ask you some questions, if that is satisfactory.

STATEMENT OF LEE LOEVINGER, ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE; ACCOMPANIED BY JOHN DUFFNER, JOHN LYONS, AND JOHN JAMES

Mr. LOEVINGER. Yes, sir, it is quite satisfactory.

I appreciate very much the opportunity to appear before this subcommittee, and the Senator, and the Senate do me honor by inviting me to express my opinion and the position of the Department of Justice.

Mr. Katzenbach, who is the Assistant Attorney General in our office of legal counsel, has previously indicated before this committee the considerations which the Department believes are important in evaluating S. 2814 and the other bills on this subject.

My position is of course precisely the same as that of Mr. Katzenbach.

In his statement of July 24, 1961 the President listed certain policy requirement which must be met in the establishment of a satellite communication system and stated that if these conditions were met he would favor private ownership and operation of the system. In my opinion S. 2814 will accomplish these policy requirements.

I believe this committee is primarily concerned with the antitrust questions involved in the various plans proposed, and I will direct my remarks to these questions. Three approaches to ownership of the system have been suggested. (1) Government ownership; (2) private ownership with broadly based participation; and (3) private ownership limited to communication common carriers.

Government ownership pursuant to statute does not involve conflict with the antitrust statutes. However, it does eliminate the advantages of competition and diversity in the same manner as does a private monopoly or limited private ownership. Therefore we support a system in which ownership and participation will be as broadly based as possible, avoiding both private and Government monopoly. U.S. communication common carriers can make a substantial contribution to the development of the satellite communication system. They will be the users of the system, and they have experience and know-how developed through ownership and operation of existing communication systems. However a communications satellite system will require skills and knowledge from many widely diverse technical and industrial fields. Therefore it appears that the establishment of a workable system at the earliest possible date can best be brought about by enlisting the technical skills and know-how of American industry on as broad a base as possible. The communication common carriers should be encouraged to participate in the development ownership and operation of the system. But other industries that have the ability to contribute should not be excluded. We believe that a limitation of ownership and participation to existing communications carriers will retard development of the system.

Further, since substantial Government funds have been and will be expended to make the system possible, it does not seem in the public interest to permit a few companies to secure the financial benefits of research and development paid for largely by the taxpayer.

82357-62-pt. 1-10

It is important that competition in the development and sale of equipment and in the utilization of the system be encouraged and fostered. S. 2814 and its broadly based ownership and with necessary controls will accomplish this result.

Under the proposals made to limit ownership to those common carriers approved by the Federal Communications Commission it would seem likely that ownership will be restricted to carriers engaged in international communications. Nine international carriers indicated a desire to participate in the ad hoc committee set up by the Federal Communications Commission to consider means for the establishment of a satellite communication system. In a report preliminary to issuance of an order setting up the committee the Commission stated that:

the international carriers themselves are logically the ones best qualified to determine the nature and extent of the facilities best suited to their needs * (Docket No. 14024, first report, May 24, 1961.)

But the Government has not spent hundreds of millions of dollars in development of satellite communications merely to provide existing carriers with additional facilities to serve their own needs, important as this is. The needs of the Nation are broader and more important than those of the communications carriers. The satellite communication system is intended to promote broad national objectives. These objectives have been set forth in the President's statement of July 24, 1961, in his message to Congress of February 7, 1962, and in the various bills introduced in Congress.

The ad hoc report recommended that ownership be limited to international carriers and indicated that because of its foreign operations, General Telephone might qualify as an international carrier. Only five of the participants in the ad hoc committee indicated a willingness to make a financial contribution-A.T. & T., American Cable & Radio (an I.T. & T. subsidiary), Western Union, Hawaiian Telephone Co. and Radio Corp. of Puerto Rico (also an I.T. & T. subsidiary). RCA made no commitment for a financial contribution. A.T. & T., Western Union, RCA, and American Cable & Radio compete directly in offering international communication services. A.T. & T., American Cable & Radio, RCA, and General Telephone, through subsidiaries or parent companies compete in the manufacture and sale of communication equipment.

Joint ownership of a communication system by competitors such as these would raise serious antitrust problems, in my opinion, unless Congress provided for specific antitrust exemption. The possibility would always exist that such ownership would result in limiting competition among the carriers in the furnishing of communication services, in the manufacture and sale of communication equipment, or in limiting competition in either of these areas of nonparticipating companies. Furthermore such limited ownership might well give de facto control to a single company, A.T. & T. With ownership so limited it appears highly probable that A.T. & T. would control the system, both because a number of the international carriers are dependent on A.T. & T. for certain services and because A.T. & T. with its financial resources, will contribute a far greater sum than the total amount that will be contributed by all other companies.

For example, in the ad hoc committee report A.T. & T. agreed to contribute $65 million, while the total contribution agreed to by all other companies was less than $13 million. In fact A.T. & T. has suggested that contribution be on the basis of expected use of the system and indicated this would result in its contributing 75 to 80 percent of total investment. (Testimony of Mr. James E. Dingman, executive vice president of A.T. & T., before House Committee on Interstate and Foreign Commerce, on Mar. 16, 1962.)

Domination of this new system by a single company would tend to frustrate the public interest objectives which the President has set as our goals. We believe this to be the case despite the fact that the new corporation will be subject to regulation by the Federal Communications Commission, for regulation cannot guarantee equitable access to the system and competition in the purchase of equipment if ownership is limited to a few interested companies, with a single one of these exercising effective control.

Broadly based ownership will minimize the possibility of control by a single company and will encourage competition in the furnishing of communication services and in the manufacture and sale of communication equipment.

It has been argued that the controls proposed in this bill are greater than those previously imposed on a private corporation. If so, the unprecedented nature of the situation not only justifies but requires unusual measures. Satellite communication is made possible through research and development paid for by Government funds because of the national interest in the establishment of such a system.

This has been called an extension of existing facilities, but it is much more. The ability to provide at economical rates communications of all kinds to all parts of the world is a revolutionary development. It is as inappropriate to call satellite communications an extension of existing facilities as it would be to say the airplane is merely an extension of the transportation facilities afforded by canal boats or railroads.

It is agreed that a workable system must be established at the earliest possible date, and we believe this can best be accomplished by broadly based ownership of the system. There would be a natural reluctance on the part of companies with large investments in existing facilities to take speedy action which would make these facilities obsolete. A company controlled by A.T. & T. could scarcely avoid considering the effect of satellite facilities on existing investments in cable facilities.

Further, new developments and improvements in the system would be considered from the viewpoint of their effect on existing facilities. A.T. & T. has extensive investment in facilities used for the transmission of network television programs to stations throughout the country and its owns the facilities for the only nationwide long-distance telephone service in the United States. It is my understanding that with sufficient capacity television programs can be transmitted from the satellite system to stations throughout the country and the world and that new developments may make long-distance telephone service within the United States via satellite system economically feasible and desirable. These are examples of the conflict of interest that could arise in a corporation controlled by A.T. & T.