GOVERNMENT USE OF SATELLITE COMMUNICATIONS

WEDNESDAY, SEPTEMBER 7, 1966

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF MILITARY OPERATIONS

OF THE COMMITTEE ON GOVERNMENT OPERATIONS,

Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m. in room 2247, Rayburn Office Building, Hon. Chet Holifield (chairman of the subcommittee) presiding.

Present: Representatives Chet Holifield, William S. Moorhead, Frank Horton, and William L. Dickinson.

Also present: Herbert Roback, staff administrator; Douglas G. Dahlin, counsel; Paul Ridgely, investigator; Joseph Luman, defense analyst; and J. P. Carlson, minority staff.

Mr. HOLIFIELD. The committee will be in order.

We continue our hearings on the Comsat operation. We have before us this morning Dr. Joseph V. Charyk, and the Honorable James McCormack.

Which one of you gentlemen wishes to proceed?

Mr. McCORMACK. I will lead off, if I may, sir.

Mr. HOLIFIELD. All right, you may proceed.

STATEMENT OF JAMES McCORMACK, CHAIRMAN, COMMUNICATIONS SATELLITE CORP.; ACCOMPANIED BY ALLEN E. THROOP, GENERAL COUNSEL

Mr. McCORMACK. Thank you, Mr. Chairman.

The Communications Satellite Corp., which is commonly called Comsat, is pleased to appear here today before your committee.

I am James McCormack, chairman of the corporation. With me is Dr. Joseph V. Charyk, our president and, I might add, several of our staff are in the row behind us.

If the committee approves, we would like to present Comsat's prepared statement in two parts. First, I would like to comment broadly and briefly on Comsat affairs and attitudes in areas where we believe this committee is interested. Dr. Charyk proposes then to go more in detail into some of the concrete questions which we know to be under consideration in your current hearings.

Because Mr. O'Connell gave the committee last week such a comprehensive picture of satellite developments and plans, we have not covered that ground in our formal presentation. We will, of course, be happy to pick up the subject in any way you wish.

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My remarks will fall under three general headings:

1. A review of the sort of company Comsat is;

2. U.S. Government use of commercial satellite communications services;

3. Comsat's position in the matter of the Government as an "authorized user" of Comsat services.

As you, of course, know, Comsat is a very special sort of corporation, unique in the communications industry or, probably, in any other. As permitted by the Communications Satellite Act of 1962, Comsat is owned half by the communications carriers and half by the public. As directed by the Congress, the initial stock issue, which raised $100 million from the general public, sought and obtained the widest possible participation. Our public shareholders of record today number nearly 150,000, with probably 25,000 additional whose shares are held in trust accounts. More than half of these shareholders own 10 shares or less. All but 4.3 percent of these holdings are in U.S. hands.

Under the law, Comsat represents the United States in the international endeavor to bring a global commercial satellite communications system into being at the earliest practicable date. Under a set of interim international agreements the members of the International TeleCommunications Satellite Consortium (Intelsat) share in the ownership of the space segment of the global system. The 53-nation members of Intelsat today comprise all but a very small part of the free world's commercial telecommunications establishment. Under the agreements. Comsat holds slightly more than half of the ownership of Intelsat, and acts as its manager. By election, a Comsat officer is serving as chairman of the Intelsat governing committee called ICSC. The agreements require that on all policy matters Comsat's vote be supported by non-U.S. ownership representing 122-percent participation.

The earth stations of the system are independently owned by the various participating national entities. Under an interim policy, the Federal Communications Commission has permitted Comsat to construct or acquire three initial U.S. earth stations. Comsat believes that three more U.S. stations are needed for use in the global system. and expects the worldwide total to approach 40 by the end of 1969. the time when the interim international agreements are expected to be replaced by permanent arrangements.

As has been noted during these hearings, Mr. Chairman, the leasing of circuits in our one presently operating satellite, the experimental Early Bird, has lagged well behind the original estimates of the carriers. We believe that this performance will soon begin to cure itself as more flexible facilities are available, providing 24-hour service, and as existing cables are more fully loaded.

Although presumably not a matter of special interest in these hearings, I might mention that Comsat is engaged in a major effort to produce, for consideration by the FCC, a plan to provide satellite services to meet all domestic requirements. In the preparation of this plan, we are working jointly with the domestic communications carriers and the broadcasting networks. Further stimulated by the now wellknown proposal of the Ford Foundation, we expect public and congressional interest in this matter to continue, probably coming to a focus some time next year.

Because the law gave such an important mandate to Comsat, the Congress also provided extensive safeguards to insure against misuse of Comsat's position. This results in Comsat being quite properlyfar more comprehensively regulated and otherwise guided and controlled than any other U.S. commercial communications organization. Satellites offer great benefits to all users of long-range telecommunications, and Comsat wants above all else to meet its responsibilities in keeping this country at the forefront in commercial satellite communications.

My second topic, as I listed them in the beginning, is concerned with the use of commercial satellite communications by the U.S. Government. I want to be as clear and positive as I can on Comsat's attitude in this matter-on our ambitions, if you will-to see commercial satellite facilities employed in fulfilling the Government's communications requirements.

Where a communications requirement is a special one, as in the case of tactical military operations, and in the Government's judgment the need is best satisfied by the Government's operation of its own system, then, of course, that is the way it should be, although there could be room, even so, for private capital and management in an assisting role.

At the same time, we believe that commercial satellite operations are essential to the purposes of Government and should be used in all appropriate ways to meet Government requirements, for the same reasons which make it desirable for the Government to use other commercial communications means, or commerical air transportation, or the resources of U.S. industry generally.

Comsat hopes that the Government will not, through creation of satellite communications capacity beyond its very special needs, foreclose the fullest use by the Government of commercial satellite communications, for therein is the key to broadly based, reliable, economical services from which the Government may select what it desires to use as needs and circumstances change.

My third and last topic concerns Comsat's position in the matter of the Government as an "authorized user," which is the language of our act, of satellite services. This matter is now before the Federal Communications Commission, and Comsat does not wish to seem in any way to be arguing the case here. I accordingly restrict these remarks to the one aspect of the issue in which this committee has expressed special interest during the course of these hearings.

Comsat has no argument with the general and familiar statement that Government policy in the procurement of commerial communications should be designed to maintain a proper balance in the communications industry. However, the Satellite Act charges Comsat directly with fostering the development and use of satellite communications. Hence we wish to insure that the satellite, as the technological newcomer to the industry, is accorded its full and proper weight in the achievement of that balance.

We recognize that in determining whether in any particular case the Government should procure services directly from Comsat, the executive branch may take into account a variety of considerations. These might well include the nature, scope, and urgency of the service; the

status of development of the global satellite system; the extent to which cost of the service should be determinative; the Government's interest in retaining alternate means of communications; and its recognition of existing investments and organized capabilities in the communications industry.

As you know, the executive branch holds that the evaluation of such considerations is its responsibility. Comsat agrees that as a matter of law such is the case.

That this view had led Comsat, along with the executive branch. to a current difference of opinion with the FCC is unfortunate. All concerned are assured of Comsat's interest in any solution that permits us to say that we have done our duty to our legislative charge and to our shareholders.

That is the end, Mr. Chairman, of my prepared remarks. Dr. Charyk is prepared to take over at this point.

Mr. HOLIFIELD. Dr. Charyk, you may proceed, and then we will question both statements.

STATEMENT BY DR. JOSEPH V. CHARYK, PRESIDENT, COMMUNICATIONS SATELLITE CORP.

Dr. CHARYK. Thank you, Mr. Chairman.

I welcome this opportunity to appear once again before this distinguished committee. Your longstanding interest in satellite communications is appreciated by our corporation. U.S. leadership in seeking to establish, in conjunction with other countries as expeditiously as practicable, a worldwide communications satellite system is a matter of great importance and interest to all of us. In the corporation we view this national policy and the congressional mandate as a matter of special trust and it is our unceasing effort to be always worthy of that trust and confidence.

The next major step in the development of a global communications satellite system will take place this fall with the launching of two new synchronous satellites. This new satellite design, which has more than twice the power of Early Bird, is officially categorized as the Intelsat II type. One such satellite will be deployed over the Pacific and one over the Atlantic Ocean. Their most important initial assignment will be to provide communications circuits for use in connection with NASA's Apollo program. For this purpose the satellites will be operating initially with Comsat transportable earth stations located at Andover, Maine, and Brewster, Wash., and with foreignowned stations located at Ascension Island, Grand Canary Island. and Carnarvon, Australia. As soon as possible, earth station facilities located aboard three U.S. vessels and deployed in the Atlantic, Pacific, and Indian Oceans will be utilized in the program. To handle other traffic needs, we intend to deploy a transportable earth station initially at Paumalu, Hawaii. The large earth station facilities at the three U.S. sites will replace the transportable units in due course, thus leading to a more efficient utilization of the satellite capacity.

In addition to meeting NASA's Apollo requirements, the two new satellites will be utilized to meet other important communications requirements. Your committee has been discussing in detail the projected use of the Pacific satellite to meet certain important DCA