Mr. HORTON. I appreciate the problem you have, because certainly you are in this situation as a corporation; you do want to cooperate with the Federal Government, and do what you can with regard to fulfilling its needs, without having to decide whether they are legally proper or not.

I do not know that you have to cross that bridge until it has been determined by the proper agency. But I was just concerned as to whether or not the corporation could have, perhaps, taken a different tack.

You can go the way you are going. And that ultimately, it seems to me, puts you in the business of furnishing whatever services the Federal Government wants without any real competition from the other carriers. Or you could just stay away from the Federal Government bidding, and if there are pressures that the Federal Government puts on you, I would like to know what they are, if any do exist. But I assume there are not any.

So I am saying that you, as a corporation, can take another tack, and that is saying: "We will only deal with the carriers." That would create an entirely different situation, because then the Federal Government could not come to you. They would have to go to these other carriers, and you would be, in essence, furnishing services to carriers who would then compete among themselves for whatever Government business might be involved.

Mr. McCORMACK. Clearly, sir, the corporation, which is very closely watched by its board of directors, will have to take each of these instances in its own light. I could visualize the next broadcast request for proposals to Comsat and the other carriers finding us saying it does not make sense for us to propose this-that should go more properly through the carriers.

But I think in an instance like this, where the traffic is so important, witness the interest of the international record carriers in it, I think to have failed to be responsive to the executive department with all of the implications that that might have for the pricing structure that might have resulted had our proposal not been in, this, I think, is a matter of mangerial responsibility to our corporate shareholders, public, in particular. I do not think we had an option in this, and neither did our noncarrier board members.

Mr. HORTON. If you become a Government carrier-and I can see where the Federal Government would have more and more demand, because if they have a liberal interpretation of what the persent law is, they are going to be coming to you more and more for the servicesyou may be furnishing a great number of Government services. And this, in the long run, may affect your ability to deal with other countries, especially if it has to do with the military. This is one of the problems that we had with regard to the shared satellite plan, if you will.

I do not know whether that is a real problem or not. But I predict it can very well be, if you are dealing as Comsat directly with the Federal Government and, particularly, the Department of Defense, for these international needs that might affect the military.

Mr. McCORMACK. Well, at present, Comsat has no indication, that I am aware of anyway, of any further Government requirements on deck now with the possible exception of the interest of the Federal

aviation industry in using satellite communications for aircraft communication. That might be an international consortium to do it in the end, but other than that

Mr. HORTON. I do not know of any either. But I predict, speculatively, within the next 12 months there will be more. That is all.

STATUS OF INTELSAT

Mr. ROBACK. We were discussing the international status of the consortium.

Under the international agreement, as a participating member, you are subject to the domestic law, so to speak, when you are dealing with the United States. When you are dealing with the U.S. Government, you are governed by domestic law. In what sense-perhaps Mr. Throop can enlighten us-is Intelsat an international organization? Mr. THROOP. Well, Intelsat is a consortium resting on an intergovernmental agreement approved in 1964, and, I think, has no corporate form other than just the Government participation. Mr. Roback, the situation is that the members of what is known as Intelsat are the owners in their respective proportions of the facilities of the space segment. You can describe them as a partnership, if you wish, which is probably closer than regarding Intelsat as a corporation. You might call it an unincorporated association. It is not a legal entity. Mr. ROBACK. Not a legal entity.

Mr. THROOP. No.

Mr. ROBACK. The President has designated it an international organization for certain purposes. What purposes?

Mr. McCORMACK. I am not sure I understood.

Mr. ROBACK. The President has designated Intelsat an international organization for purposes of certain privileges and immunities, for example.

Mr.THROOP. Yes, that is true. But the privileges relate to the memers of the organization, I think.

Mr. ROBACK. The individual members?

Mr. TнROOP. That is right, for certain purposes, as you may describe it, and I think it has been so described as an international organization. That does not mean it is a legal entity.

FCC JURISDICTION OVER CONTRACTS

Mr. ROBACK. What was the jurisdictional issue about Intelsat III? In your testimony you referred to getting approvals and authorizaions and what-not from the FCC for Intelsat II. What was the difference, I mean why did the jurisdictional problem emerge in Intelsat III?

Mr. McCORMACK. Dr. Charyk has been closer to that than any of us. Dr. CHARYK. Actually there is no difference between Intelsat II and Intelsat III.

Mr. ROBACK. Why did you have a fight on III and not on II?

Dr. CHARYK. It was strictly a question of timing, if you will. In the ase of Intelsat III, at the time that the Intelsat organization was prepared to make the decision to proceed forthwith with the procurenent of the satellites, we had not received as yet the final FCC author

ization to proceed with the construction of the satellite. So there was some concern in Intelsat, therefore, that the program was being delayed because a final decision from the FCC had not been received by Comsat in order to permit Comsat to proceed.

In the case of Intelsat II, the timing turned out to be a little bit different. In that situation we did have the approval of the Federal Communications Commission to go ahead with the contract prior to final action by the Intelsat, so the problem did not arise. It was simply a matter of timing.

Mr. ROBACK. In the discussion we had in the earlier hearing, there was testimony that there was maybe a month's delay in contracting for a system which was in the 1970 time frame.

Dr. CHARYK. Intelsat III is for 1968, that is, the time frame for Intelsat III is 1968.

Mr. ROBACK. It starts in 1968?

Dr. CHARYK. That is right. The first two satellites will probably go up in 1968.

Mr. McCORMACK. You see we are up against a leadtime of a couple of years to get the satellite.

Mr. ROBACK. All right. This became a matter of serious concern to Comsat because of the fact the FCC hadn't approved this and there seems to have been question whether they even should approve it. Why did it become a matter of concern? You say because there was some restiveness among the international committee.

Mr. McCORMACK. I can tell you, Mr. Roback, what I have said about that since. We stretch ourselves in our sort of intermediary position where we feel it very important, as chairman of the Interim Committee of Intelsat, because the United States took the lead in the satellite business in the first instance. We feel it very important to supply leadership to the committee, and it is up to us to do it. It is a responsibility.

So to keep the ball rolling as fast as is reasonable to on the international scene, we have to move. The executive committee of Intelsat, called the ICSC, is very much like a board of directors of a large diversified corporation. It isn't like a normal international conference where you spend a year getting your position papers together and all that sort of thing.

This is run as an active business. So on the one hand we were encouraging our foreign associates, our non-U.S. associates, in the Interim Committee to consult with their home offices and to get on with this. I think we made a bet which turned out later to have been a little bit reckless, that we could work the procedures through the FCC on the same time schedule, and it didn't happen.

So there was some unhappiness.

I think it completely fair to say at the present time this is water under the bridge. Just to make sure we don't inadvertently walk into another one like that, we have an arrangement with the staff of the FCC, specifically between myself and Messrs. Strassburg and Ende. that for the next foreseen requirement coming along-it may never come through, well, it will come through someday but it will not com through as quickly as one might to see-the aeronautical satellite "Let's take every step of this as we go along, talk to each other about the information you need, how much time you think it is going to tak you to act, and we will try to mesh it in with the work of the Interin

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.
Engins MATRA SA, France-Attitude Control Electronics.

Entwicklungsring Nord (ERNO), West Germany-Positioning Orientation
System.

Hawker Siddeley Dynamics, Ltd. (HSD), United Kingdom-Structure. ITT Federal Laboratories, United States-Communications Subsystem. *Laboratoire Central des Telecommunications (LCT), France-Command Decoder, and Assembly, Integration and Test of the Transponder (CT&C) Subsystem.

Mitsubishi Electric Corporation (MEC), Japan-Power Control Unit and Equipment Converter.

Societe Anonyme de Telecommunications (SAT), France-Solar Array. Standard Elektrik Lorenz (SEL), West Germany-Telemetry Encoder. Sylvania Electronic Systems, United States-Electronically Despun Antenna.

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