Committee and not fall into this trap again," which involved no ill will on anybody's part that I am aware of. In addition to this Mr. ROBACK. Is this a matter of jurisdiction or a matter of time? Mr. McCORMACK. I agree with Dr. Charyk it was a misnatch of timing. Mr. ROBACK. You weren't challenging the jurisdiction of the FCC regarding the approval of the characteristics of the system. Mr. McCORMACK. Never at all. Never. Dr. CHARYK. As a matter of fact, Mr. Roback, we had filed an application for authorization to construct the Intelsat III type of satellites in February. Mr. ROBACK. The mere fact you filed the application signified you wanted to get that approval. Dr. CHARYK. Absolutely. FOREIGN PARTICIPATION IN INTELSAT CONTRACTS Mr. ROBACK. But there was an issue of delay, and I wondered with a previous witness whether part of the delay wasn't the eagerness of foreign contractors to get into the act, because I have a news release by TRW of September 5, which says, "Nine international aerospace companies and two U.S. firms have been selected to participate with the TRW in Intelsat." (The article above referred to follows:) TRW SYSTEMS NEWS FOR RELEASE SEPTEMBER 5, 1966 NINE INTERNATIONAL COMPANIES SELECTED BY TRW FOR GLOBAL PROGRAM REDONDO BEACH, CALIF., September 5, 1966.-Nine international aerospace companies and two U.S. firms have been selected to participate with TRW in the development and production of satellites for the Global Communications System expected to be in operation in 1968. TRW Systems, the operating group of TRW, Inc. responsible for the Comsat project, was recently awarded a $32-million contract by the Communications Satellite Corporation on behalf of the Interim Telecommunications Satellite Consortium (INTELSAT) for the research, development, and construction of six satellites. The companies participating with TRW and their areas of responsibility are: *Bell Telephone Manufacturing (BTM), Belgium-Local Oscillator and Mixer Filter. Contraves AG, Switzerland-Electrical Integration Assembly. Entwicklungsring Nord (ERNO), West Germany-Positioning Orientation Hawker Siddeley Dynamics, Ltd. (HSD), United Kingdom-Structure. Mitsubishi Electric Corporation (MEC), Japan-Power Control Unit and Societe Anonyme de Telecommunications (SAT), France-Solar Array. In addition to the above major participants, Lockheed will supply earth sensors and Aerojet-General will provide the apogee motor for each satellite. These companies are affiliated directly with ITT. The ITT and Sylvania contracts, each fixed price with incentive clauses, are valued at $10,190,000 and $1,374,000 respectively. Aside from those affiliated with ITT, the value of the subcontracts with six international participants is in excess of $1.5 million, American. Delivery to COMSAT of the six flight spacecraft will begin in the twenty-first month of the contract and continue through the twenty-seventh month. The first four will contain components and subsystems of U.S. origin and the fifth and sixth satellites will incorporate subsystems manufactured by the international participants. All spacecraft will be assembled, integrated and tested at TRW Systems Technology Center in Redondo Beach, Calif. Similarly, ITT-FL will integrate all of the transponders in its facilities in Nutley, N.J. Mr. McCORMACK. All of the proposals we had, Mr. Roback, included some foreign participation and, as a matter of fact, it was part of Comsat's prospectus request for proposals, which I should leave to Dr. Charyk because he was around and I was not around. Other things being equal, this being an internationally financed venture anyway, preference would go to the one offering the most productive international participation. Mr. ROBACK. If members of the Interim Committee have, you might say, nationals who are subcontractors or participants in the contracting, that gives them a little more sense of community and promotes ease of agreement, too; that is a commonsense proposition. Mr. McCORMACK. All this is a part of the general-challenge is a nice word-problems is probably more like it, of getting into a new business on an international scene. At the present time-I have checked this out with my industrial friends in Europe, in England and France and Germany, and I am sure whereof I speak and I am sure the same is true in the Japanonly in the United States does there exist the organized competence in a form to take on a prime contract with all of the responsibilities and penalties for failure that might go with it. On the other hand, with our foreign participants paying something like 45 percent of the costs of this procurement, there is a completely understandable desire on their part to get into the business via components or whatever way. I suggest that an international venture involving international financing-especially in an area so glamorous as space where the urge to get in is just enormous-I suggest that an international venture of this sort cannot in the long term be viable if it does not give due attention to the aspirations of the other partners. INTERNATIONAL SATELLITES FOR DOMESTIC USE Mr. ROBACK. Let me put the question now in relation to the status of this international organization and concerns that are emerging with regard to domestic satellites for television and other purposes. Is it your concept that the international consortium-that Intelsat will be the owner of services even if they supply a domestic field? Mr. McCORMACK. Well, this really relates, Mr. Roback, to most fundamentally of all-to the permanent arrangements which need to be worked out between now and 1969 because the time at which a large domestic system for TV and other purposes might be aloft is at the end of the road of the present interim agreements. Now, to get a financing structure at all-and I am speaking from reports, I was not here at the time-there had to be some estimates made in advance of the cost of putting up a global system, and nat urally all partners wanted some sort of a stop loss, figuring, "I will not be required to contribute beyond some given amount." This required making an estimate based on the best yardstick, the best measuring devices then available, which was primarily the amount of telecommunications existing in various countries. If 12 percent of the world's telecommunications is in England, well that is a figure that goes in. If 48 percent is in the United States, that goes in. So they put together a framework in which not arbitrarily but as carefully as could be done the obligations of the partners in this scheme were set up for the interim period. For the longer haul, obviously the financial arrangements have got to be worked out in such a way that they are adjustable, they are flexible, and there is no reason why the accounts could not be adjusted monthly, so you are not dealing any longer with an arbitrary formula. As we move toward that, then the financial aspects of ownership of the satellites can, in my opinion anyway, very easily be removed from any area of contention. Mr. ROBACK. Do I understand correctly then that insofar as domestic traffic is credited to Comsat as the domestic participant in Intelsat, that, therefore, this wouldn't be credited to the books of the other participants if such a formula is worked out? Is that what you are saying? Mr. McCORMACK. I would guess the formula would have to recognize three things: One, before you get to the financial arrangement, it has to recognize the political aspects of international organizations, where national sovereignties are involved Mr. ROBACK. And that would not necessarily be your sole or primary responsibility? Mr. McCORMACK. This could be completely outside Comsat's sphere in the permanent arrangements. Then coming down from there, there is still the financial and the operational aspects. Take the financial first. It is always necessary in long-range communications that the heavily trafficked routes-just like rural free deliveries in the old days of the postal system in this country-the heavily traveled routes have to bear a part of the costs to enable you to extend out in developing new areas and new markets, et cetera. This is reflected in the shares of Intelsat as they are now set up. Traffic across the Atlantic and across the Pacific between the United States and Europe, on the one hand, and Japan, Australia and New Zealand and Philippines, on the other, constitutes heavy traffic routes. So in the global system I think there is no question that these heavy traffic routes are going to carry a part of the costs of getting traffic to east Africa and other places where you want to go. But if you come down to such a big chunk of traffic as would be involved in a satelite service for domestic use in the United States, where television alone is enormous compared to the total of world telecommunications, then you begin to get into questions of how much should the heavy traffic parts bear for the thin ones. I don't have any doubt myself-Mr. Horton referred to me as an optimist of another point here-I don't have any doubt myself at all on being able to work this out with our international partners and come up with a formula which doesn't penalize anyone with the exception, say, that traffic between here and England is going to have to pay a part of the freight for traffic between Mexico City and Buenos Aires, but this is normal in the communications business. Mr. ROBACK. But if you add the U.S. share generated of domestic and international satellite traffic, conceivably it could be 95 percent of the total. Mr. McCORMACK. You could get the thing so overbalanced it would not be a good financial structure. Mr. ROBACK. You could get 95 percent of Intelsat conceivably. Mr. McCORMACK. Which I am not sure our international partners would want. Mr. ROBACK. This issue is an open one really, as to what kind of relationship there will be between the international group and the domestic corporation, as to the provision of services and the disposition of revenues for domestic satellites services? Mr. McCORMACK. Very much open. The only stance that Comsat has taken is that, in connection with the domestic systems that have been proposed, the U.S. decision has to be a wise one, it has to be financially sound, and we think our partners would want it to be the same way, but above all else, we should not by unilateral decision on our part before talking the problem out with our international partners, proceed with a new galaxy in the firmament here which might destroy all the good work which has been done over the years. COMSAT INTEREST IN DOMESTIC SYSTEM Mr. ROBACK. I might ask, and perhaps Dr. Charyk might respondwhat is the status of the corporation's interests in domestic satellite systems? Dr. CHARYK. The interest has been an active one for a long time. We have endeavored to assess the requirements for communications satellites to handle domestic traffic. We have over the past year or so discussed these requirements with all of the domestic carriers and the television networks. As a matter of fact, we invited the communications carriers and the television networks to a meeting here in Washington last spring, and outlined some of our preliminary thinking on the capabilities of satellites for serving various domestic needs, both television as well as other normal communications traffic. We have continued our studies in consultation with the carriers and the television networks since that time, and we filed recently with the Federal Communications Commission some of our present concepts on the satellite model that we think would be responsive to the domestic communications needs. This model is being further refined, and we would anticipate that when we submit our next filing to the FCC in this connection that we will have more details to provide. We have also discussed elements of this model with the Ford Foundation who, of course, has an interest in a particular aspect of domestic communications service by satellite. Mr. ROBACK. Your proposal goes beyond an alternative to the Ford Foundation proposal, in the sense that it is not limited to domestic television. This would have to do with all kinds of services. Dr. CHARYK. That is right. We feel that the job can be done in the most economical fashion by incorporating all of the requirements and producing a common system that will serve all of the customers. We feel that in this way the maximum economies can be achieved, and hence that such an arrangement would prove to be of the greatest advantage to all of the users. Mr. ROBACK. Have you examined, technically, the Ford proposal? Dr. CHARYK. We have been studying the Ford proposal. We have some questions about some of the assumptions that are made. We are planning to meet with some of the technical people who have been involved in carrying out these calculations for the Ford Foundation, and perhaps they can enlighten us on some of the assumptions they have made. Mr. ROBACK. In other words, they are not too clear as they stand, you say. Dr. CHARYK. Some of the assumptions are not clearly spelled out so it is impossible to make a rigid conclusion as to some of the results. However, I have no doubt that when we sit down with them we will be able to resolve these questions without any difficulty. Mr. ROBACK. Is it your concept that the domestic satellite services will be provided through a multipurpose satellite? Dr. CHARYK. We would certainly think so, because we think that the greatest economies can be achieved in this way. Mr. ROBACK. Would this be multipurpose in the sense that there wouldn't be any operating distinction between international and domestic services? Dr. CHARYK. No; I was focusing just on the domestic traffic, but using multipurpose in the sense that the satellites would handle television traffic, they would handle telephone traffic, they would handle data traffic, and the capacity of the system would be used in the most efficient fashion to meet all of the needs. Mr. McCORMACK. I should add this, Mr. Roback, a set of satellites so positioned as to illuminate the four corners of the continental United States for television transmission, for example, automatically illuminates the bulk of the urban population in Canada so I would not discount in advance some foreign implications of what we call domestic traffic. Mr. ROBACK. Canada is domestic by proximity. Mr. McCORMACK. There are some Canadians who might disagree a little bit. Dr. CHARYK. Further to that remark I should add we have discussed the matter with some of the Canadian interests as well. Mr. ROBACK. This is not the multipurpose satellite that you identify as Intelsat IV? Dr. CHARYK. No; this is not the same satellite. But actually the characteristics of Intelsat IV, and the characteristics of the type of satellite that would be useful for meeting these domestic requirements are not greatly different. Mr. MOORHEAD (presiding). Would the ownership of the four satellites which would be multipurpose for domestic use be in Comsat as opposed to ownership in Intelsat, is that correct? Mr. McCORMACK. It might be, Mr. Moorhead, or at least financial arrangements would have that effect, and operational control and so |