ANTITRUST PROBLEMS OF THE SPACE SATELLITE

COMMUNICATIONS SYSTEM

FRIDAY, MARCH 30, 1962

U.S. SENATE,

SUBCOMMITTEE ON ANTITRUST AND MONOPOLY
OF THE COMMITTEE ON THE JUDICIARY,

Washington, D.C.

The subcommittee met, pursuant to recess, at 10:05 o'clock a.m., in room 318, Old Senate Office Building, Senator Estes Kefauver presiding.

Present: Senators Kefauver (chairman) and Wiley.

Also present: Bernard Fensterwald, Jr., staff director; Peter N. Chumbris, counsel for the minority; James E. Bailey, counsel for the minority; Ronald D. Raitt, counsel for the minority; Herman Schwartz, assistant counsel; Cecil Mackey, assistant counsel; Robert M. Hausman, assistant counsel; Paul S. Green, editorial director, and Gladys E. Montier, clerk.

Senator KEFAUVER. The committee will come to order.

The committee is highly honored to have the able and distinguished senior Senator from Oregon, Senator Wayne Morse, with us this morning.

Senator Morse has long been interested in the matter of communications satellites, both from the viewpoint of foreign relations and from the viewpoint of antitrust and monopoly. He has made a thorough study and is very knowledgeable on the subject. His viewpoint is always respected and appreciated.

We are grateful, indeed, to you, Senator Morse, for coming to testify before our committee this morning. I am sure that Senator Wiley, who is here, joins in welcoming you.

Senator WILEY. What about Senator Wiley?

Senator KEFAUVER. I say I am sure that you join in expressing a hearty welcome to our colleague from Oregon.

Senator WILEY. I always do that. Even when he is wrong, I like to see him.

STATEMENT OF HON. WAYNE MORSE, U.S. SENATOR FROM THE STATE OF OREGON; ACCOMPANIED BY BENJAMIN GORDON, STAFF ECONOMIST, SENATE SMALL BUSINESS COMMITTEE

Senator MORSE. Senator Kefauver and Senator Wiley and members of the committee staff, it is my pleasure to testify before you this morning on an issue that I think is of vital concern to the American, not only today, but

Senator KEFAUVER. Excuse me. I forgot to say that Senator Morse, with me, is a cosponsor of S. 2890, which would establish a Government corporation for the operation of the communications satellite. Senator MORSE. I want to repeat myself for just a moment, Mr. Chairman.

I want the Senator from Tennessee and the Senator from Wisconsin to know that I appreciate very much the opportunity of testifying on an issue which I think is of vital concern to the American people, not only today, but will be of vital concern to future generations of Americans for a long time to come.

I would like to have the permission of the committee to associate with me at this hearing my chief counsel and adviser in regard to the subject matter of the hour, Mr. Benjamin Gordon, who is the staff economist of the Senate Select Committee on Small Business, and who has worked for some years on the public policy problems connected with the satellite program and in the patent field. I would like to have him sit with me at these hearings to confer with me as we come to discuss some of the very complex and complicated problems that we all know are involved in this subject matter.

Senator KEFAUVER. Senator Morse, we are delighted that you have Mr. Benjamin Gordon with you. The chairman knows, as you have stated, that he is very knowledgeable on this subject; that he has studied it a long time; and he has a great deal of detailed information on which he will be helpful to you, as he has been helpful to me and to other Senators who are interested in this problem.

Senator MORSE. Before I turn to my prepared testimony, Mr. Chairman and Senator Wiley, I simply want to say categorically at the outset of my testimony that I am thoroughly, completely, unequivocally opposed to the administration's program in this field.

In my judgment, the proposals of the administration in this field are not in the public interest; that, in my judgment, the American people must be thoroughly educated in the months ahead in regard to what is involved.

And I propose to do my very best to participate in that educational process from coast to coast, for I feel that I sit somewhat in the same position that I sat in, during 1954, when I started the fight in the Senate against what I then described as another administration's giveaway of the whole atomic energy program, for which the American people had spent billions of dollars and in return for which they would have received very little, had that ill-fated bill gone through the Congress.

You may remember that that bill was offered us one afternoon under a unanimous consent proposal to agree to vote on it that day.

It consisted, as I recall, of some 110 pages, more or less. I was satisfied, as I am satisfied about this bill or this subject matter, that there was not the enlightened understanding in the Senate of the United States which justified any such early vote, and I objected, as the record will show, to a unanimous consent agreement.

I was told within the rules of the Senate, but in language that was not very friendly, that I could either give the consent to enter into that unanimous consent agreement or I could start talking.

That is not too difficult for me to do when I have got a good case. And you will remember, as the record will show, I assured the then

majority leader I would be glad to do that, but that he was not going to get any unanimous consent agreement to steamroller that bill through the Senate.

He forgot that I had an army behind me, for we debated that bill for 13 days and 6 nights.

Remember, I held down the graveyard shift 2 of those 6 nights. And we stopped that bill in the form in which it was presented by offering amendment after amendment that would never have been added to the bill, had we agreed to adopt the steamroller tactics proposed of unanimous consent agreement to vote on that bill that afternoon.

I allude to that, gentlemen, because, in my judgment, there is a parallel. In my judgment, the Members of the Congress of the United States could not pass an elementary examination on the implications and the import of the subject matter that we are considering this morning because the import of this subject matter is going to be of great consequence to this Republic for generations to come, and I never pass cards under the table. I lay my hand on top of the table. I am not for early action on this legislation. Early action on this. legislation is not necessary in the public interest. But what is of vital importance is that there be a full disclosure of the public's business in regard to this subject matter, and that is going to take time.

This has got to be discussed and debated at the community level, in one discussion group after another, meeting after meeting of such organizations as the League of Women Voters, our various foreign policy committees that exist by the hundreds at the community level, our discussion groups, our classrooms, and our service clubs.

This is a subject, in my judgment-and I feel very deeply about it— that the American people must know about before their legislators vote on it, and they must know about it so they make clear to the legislators their citizenship position in regard to it.

And so I say quite frankly the senior Senator from Oregon is going to be in no hurry for an early vote on this legislation, and I cannot think of a greater mistake we could make in the public interest than to join in trying to rush legislation on this subject matter through in this session of the Congress.

I say to my President this morning from this witness stand:

"You will make a great mistake if you try it, because you, too, Mr. President, have an obligation to make perfectly clear to the people of this country all of the implications and potential consequences of this kind of legislation."

Now, so much for a general statement of my attitude in regard to legislation.

I now set forth in some detail my position on the specifics.

I appreciate very much the opportunity you have given me to testify on a subject that is of enormous interest to Americans of today and Americans of future generations.

Space research and technology have fired the imagination of the entire world. Colonel Glenn's magnificent and epochal flight is recognized by all as only a beginning. Today, a few brave men risk their lives for a brief venture into the unknown-in the not too distant future, travel into deep space may become commonplace. Today, a few signals are bounced off an experimental communications space

satellite. Within the next 10 to 15 years, there is a good chance that communications between the most distant parts of the world will become cheap and reliable.

Other potential uses of space technology and research, such as meteorological and navigational research, are now contemplated. According to many, there will come other uses that now defy the imagination. Our world is shrinking and our economic, political, and social institutions are becoming more and more intertwined.

Achieving an inexpensive and reliable system of space satellite communication in the near future is a most urgent task. Such a system will further international understanding by bringing the peoples of the world closer, thereby creating broader and more numerous common interests; it will help the development of the poorer countries of the world for it will make them more accessible to those who can help them. Moreover, although the United States is presently in the vanguard of scientific knowledge and study of space, and has always directed much of its research to precisely the type of peaceful uses exemplified by the communiciations satellite, the Russians at this time have the rocket launching capability to send a heavier and more complex satellite into space.

We must overcome this Russian advantage for space is one of the most significant areas in the competition between the free world and the Communist world. It is a competition as to which system produces more, better, faster, and for the benefit of the most people.

We must therefore insure that all our space programs, including communications satellites, continue to move along as rapidly and efficiently as possible. In the past decade the American people have not hesitated to invest billions of dollars in these projects. Moreover, the fruits of this investment should, I urge, be used for the widest public interest and not primarily for the benefit of a privileged few. The communications satellite system must not fall under the dominance of one or more private corporations-who, properly and necessarily, owe a first duty to their stockholders to earn profits; the great potential of an artificial satellite system must not be used to enhance present monopolies or to facilitate conduct inconsistent with our antitrust laws. Finally, the system must lend itself readily to the needs of our foreign policy and of international cooperation.

All those objectives with respect to a communication system can be achieved by government ownership. Their achievement will be very difficult, if not totally impossible, with any system of private ownership.

Before discussing the antitrust and monopoly issues-which permeate all aspects of the problem-I should like to make a few general observations.

SPACE A NATURAL RESOURCE

Space, whether used for communication, travel, research, or for anything else, is a natural resource which properly belongs to all the people. Unlike parks, rivers, and other God-given resources which are readily available for immediate use, space has become useful only through billions of taxpayer dollars, and billions more are still necessary. The fruits of these billions should therefore be utilized for the

benefit of all the people, and should not be a gift to a few corporations. And a gift it would be, because it involves research that is beyond the capability of any private corporation to finance with its own funds. Launching research, rocketry and satellite technology, and other aspects of the space program require such huge funds that private corporations could never have undertaken such a program, and could never pay the Government back for it. By the end of 1961 about 60 satellites had been launched. The techniques developed and data gathered from these programs will form the backbone of any future space program.

To give this dearly purchased know-how over for benefit of the private corporation and not for the public as a whole, would be like giving over the rights to develop atomic energy to a private corporation. Any private entity, no matter how widely owned, is necessarily in the business of making money, first and foremost. It has a duty to its stockholders to do so.

Inevitably, this private interest would clash with that of the public and we would see the all too frequent repetition of the unequal struggle between regulatory agency and industry, a struggle in which victory is rarely enjoyed by the public. It would be shocking if private business were to take over a major phase of our achievements in space after the taxpayers of the United States have spent billions of dollars to bring about those achievements.

FOREIGN POLICY CONSIDERATIONS

Ultimately, a worldwide communications satellite system will have to be operated on an international basis-even present international communications are partially owned by foreign governments which own all such facilities in their countries.

It is, therefore, crucial especially at this stage, to maintain a simplicity and flexibility in the organization of the system so that our Government will later be able to propose any system of ownership and control which is in the best interest of the United States and the world as a whole.

If the satellite is owned and controlled by a private group which is making good profits-and the prospects are that the ultimate revenue of an operable system will be in the billions-we will be forced into the position of either buying out the private owners with more taxpayers' money or setting up an incredibly unwieldy system of joint international operation.

As a Rand Corp. study recommended in 1960 and 1961—

The initial arrangements on the part of the United States for the management of the communications satellite system should be considered provisional and subject to systematic review. Therefore, the more flexible the initial arrangements are, the better.

Let us not ignore a few practical facts of life. If it should be concluded, after some experience, that the initial organizational structure was wrong, it would be rather easy to transfer a governmental project to private ownership, provided such a transfer were to be in the public interest. On the other hand, it would be most difficult, to say the least, to force a privately owned organization to become governmental, or to transfer its assets and activities to the Government without heavy tribute.