ATTACHMENT A

COMMUNICATIONS SATELLITE CORP.

Excerpt from Memorandum for Directors from James McCormack Dated: September 16, 1966

"Our review of the salient facts indicates that all the actions taken in behalf of the Corporation which are referred to in the letter were actions about which the Board had been fully advised, and which were carried out in accordance with appropriate Board authorizations. It does not seem necessary at this point in time to re-visit with the Board the reasons why these actions were recommended by management or analyze the Board's endorsement of them.

The review also enables me to state categorically that the Corporation has not refused to submit itself to the jurisdiction of the FCC, as Mr. Westfall states. Furthermore, we have not had any grand strategem to undermine the effective exercise of the FCC's jurisdiction by presenting the FCC with a fait accompli when it came to a determination of the 'authorized user' proceeding. It appears to us, as confirmed by recent ITT testimony before the Holifield Subcommittee on Military Operations, that all suggestions of pernicious action on the part of the Corporation stem from nothing more than a different opinion as to what activities the Corporation may legally undertake, in light of the Communications Act and the Satellite Act. The following resume of significant facts should leave no doubt in your minds that the Corporation has consistently recognized the jurisdiction of the FCC over its activities; has kept the Commission fully apprised of all of its activities; and has made all necessary applications to the Commission in order to carry out the program authorized by the Board.

1. The fact that FCC requested the filing with it, late in 1965, of comments on the questions, among others, as to whether, as a matter of law, non-carriers could be authorized to obtain service directly from Comsat, and as to the nature and intent of the authorization required, indicated that as a minimum, these questions were debatable.

2. Prior to the submission by Comsat to DCA of its proposal of 31 May 1966, Comsat had already been authorized by the FCC to provide service directly to the U.S. Government, in connection with the Apollo program, under opinions issued after the initiation of FCC's 'Authorized User' Notice of Inquiry which made no reference to any restrictions on the Corporation's legal authority to provide such service upon Government request.

3. In responding to a request of the Department of Defense for service stated to be urgently required in connection with our operations in Southeast Asia, Comsat, having previously been authorized by FCC to provide service to aid in lunar exploration, can hardly be charged with improper action.

4. Comsat's proposal of 31 May 1966 in response to DCA's request for proposals expressly recognized the necessity of an effective FCC tariff, and was subject to the provisions of a normal DCA Basic Agreement under which the provision of service is subject to an appropriate tariff and applicable regulatory requirements.

5. On 1 July 1966 DCA announced its award to Comsat with respect to 'these urgently need services', on the ground that 'the proposal offers the greatest advantage to the Government and affords the greatest assurance of providing the earliest possible service'.

6. FCC's 'authorized user' announcement of 23 June 1966 stated that under the law Comsat had authority to provide service directly to the Government under 'unique and exceptional circumstances'-a criterion amplified in the text of the Decision released on 21 July 1966 to include service 'otherwise required in the national interest'. Under the circumstances the Commission's announcement, as well as the text of its Decision, clearly warranted the conclusion by Comsat that the service requested by DCA, as confirmed by a Communication Service Authorization issued after the release of the Decision, was a service which it might appropriately render even under the Commission's own standards. 7. Communications from Comsat to the FCC before the date of the FCC's Decision had advised the Commission of the authorizations proposed to be sought from it in advance of the provision of service to DCA under an effective tariff. Such communications had appropriately indicated that in such filings Comsat would, of course, reserve its legal position as to the conclusiveness of the

decision of the Executive Branch of the Government concerning the 'national interest' in obtaining service directly from the Corporation.

8. At the present time, the Decision of the FCC is not final. There are pending before the Commission Petitions duly filed not only by Comsat but by the Executive Branch of the U.S. Government, seeking reconsideration and clarification of the Decision on the ground, among others, that the judgment of the Executive Branch as to the 'national interest' is conclusive.

9. Comsat has filed with the Commission an Application seeking, among other things, authorization to provide the proposed service to the Government, in conformity with the requirements of the 'authorized user' Decision, it has made a showing that the proposed service is in the 'national interest' and hence is within the four corners of the Decision.

Mr. Westfall's letter also criticizes the Corporation for its alleged refusal to recognize that the viability of the established carriers would be imperiled by a rate structure which allows a customer to pay different rates for channels between the same points. It is not entirely clear to us whether the rate structure referred to is the Corporation's rate structure. ITT's rate structure, or some hypothetical rate structure which supposedly is applicable to all international carriers. Clearly, Comsat's rate structure can only be related to the facilities which it owns and operates. In any event, it is not Comsat's rate structure which gives rise to the difficulties described in the letter. ITT's complaint can only be directed against the statutory language which authorizes the Government to deal directly with the Corporation, and against the policy established by the Executive Branch of the Government as a basis for implementing its statutory rights."

ATTACHMENT B

COMMUNICATIONS SATELLITE CORPORATION

Except From Letter of James McCormack to Ted B. Westfall Dated: May 4, 1966 Your extensive treatment of the tone of my memorandum of 16 February leads me to believe that you have read more into my words and attitudes than was intended, or than I can now find by re-reading them. I meant in the first place that it was a mystery to me how Comsat could be charged with wrong-doing when, insofar as I could discover, none had occurred. Beyond that, it was especially mysterious if these apparently erroneous charges had come from an international carrier-in light of Comsat's elaborate measures to brief these carriers in advance of the trip to Southeast Asia, to make contact with representatives of the carriers while there and, as announced in advanced, to report fully to the management of the carriers after the visit. Further, it was at least puzzling why the charges had been made directly to the State Department without notification to me, who might have been able to reduce unnecessary difficulty by correcting obvious errors of fact or interpretation.

Neither should you put great weight on the fact that I chose personally not to run down the rumors as to who the accuser might have been. The important thing was the charges themselves which, if true, would have presented a most distasteful problem. I therefore went directly to the State Department as quickly as I could, found out what the charges were, found that they had largely already been settled through communication with the embassies, and cleared up any remaining points-at least so I believed. As you note, I did take the matter seriously. Most of all, as stated in my memorandum of 16 February, I was disturbed by the thought that this surprise attack in the State Department indicated that we might well be subject to similar attacks in other quarters, inside and outside of government. This I thought should be known to all of the Comsat Directors.

Let me turn next to your concern over "Comsat's policy of refusing to recognize American carriers operating abroad and of insisting on dealing only with government agencies." This simply is not Comsat's policy by any definition I can put on the words. To quote two passages from my widely disseminated policy statement of 20 January on this subject:

"As regards ownership or operation of associated electronic ground environments outside of the United States, Comsat representatives are especially careful not to infringe in any way on the proper interests of any other communications organization-foreign or domestic, national or commercial-insofar as these are known to Comsat.

"In all international contacts, considering the Corporation's national and international responsibilities, it is clear that Comsat can neither serve as an agent of any other U.S. commercial organization nor delegate its own responsibility to any such other organization as Comsat's agent."

Taking this policy statement specifically to the case of the Philippines, it would seem to me unthinkable for Comsat to appear as the promoter of the cause of any U.S. carrier among three competitive U.S. interests and one or more Philippine interests.

In this connection, one statement in your letter troubled me especially: That before our representatives visited the Philippines you had an agreement with the Public Service Commission on getting a ground station in operation, whereas after our visit the Philippine government advised you that they wished to reopen the matter. I have pressed very hard on this point within Comsat and have the following statement, prepared by the responsible Comsat representatives who were engaged in the Philippine discussion:

"At the very outset of the conference with the Philippine officials arranged by the U.S. Embassy, the Corporation's representatives were informed that the major unresolved question from the Philippine point of view concerned the financing and ownership of the ground station. At no time during the meetings with the heads or acting heads of the government departments most directly concerned with this question was there any indication that a decision had already been reached favoring Globe-Mackay. It was also the understanding of the other carriers, RCAC and PLDT, that the matter of ground station ownership was still an open question."

In the circumstances, being committeed to the U.S. Government to get satellite communications to the Philippines operating at the earliest particable date, what other route than an approach directly to the Philippine government could have been used for securing Philippine agreement?

As for any Comsat interest in the construction or operation of a ground station in the Philippines, I will say once again exactly where we stand. We have at no time had any interest whatsoever in the ownership or operation of the permanent station. Neither do we have any interest in leasing a transportable station temporarily to the Philippines if there is any other solution acceptable to them which will initiate service at an earlier date than the date when a Comsat station could be made available. This was re-emphasized in our exchange of telegrams with the government immediately following Comsat's April Board meeting.

Let me turn next to your view that Comsat has encouraged foreign governments to seek IADB and AID funds in cases where private capital was available. This of course in part goes back to times before I came to Comsat, so I turned to the responsible staff for a statement in the matter, from which I quote below.

"All inquiries concerning possible assistance in ground station financing from AID sources have been referred by the Corporation's representatives to the U.S. embassy and AID missions abroad. At no time have the representatives of foreign governments been encouraged by the Corporation to expect financial support from AID."

"Specifically, [Mr. Westfall] states that Mr. Price told Mr. Aibel of ITT ‘that Embassy reports on the Comsat visit to the Philippines disclosed that Comsat representatives suggested that funding for earth stations could possibly be secured for AID.' Since this allegation was so clearly contrary to the facts, we took the matter up with Mr. Price. He informed us that he did not recall leaving any such impression with Mr. Aibel, but that if he had done so, it was unintentional. Mr. Price also said that, on rechecking the Embassy reports, he had verified that no such statement was contained therein, and that he thereupon had telephoned Mr. Aibel in New York to that effect."

As for IADB loans to Latin American countries, I am similarly assured that we have not promoted such a source of financing any more than we have tried to influence these independent nations in any other direction. I would assume in any case, with the Bank's policies being set by the member nations, including certainly the United States, that the suggestion of any private corporation would be most unlikely to receive any consideration beyond its merits.

I will pass on to the comment in your letter, amplified by your remarks at the April Board meeting, that Comsat has introduced an element of confusion in Latin America which will have the effect of delaying the introduction of satellite communications in that area. Again the particulars have to do with Comsat events before my time, but I would note that in the discussion at the April meeting

older hands than I in Comsat took strong exception to your assertion. I am left with the impression that there is a considerable body of opinion which would say that if Comsat has contributed to delaying things in South America it is because of holding back in order to give the established international carriers as long as possible to try to work out arrangements with the appropriate governments for earth station franchises, which despite the passage of over two years they have been unable to do.

To this I will add another quote from the Comsat staff report.

"The Corporation's representatives repeatedly have made it clear in their discussions with foreign governments that the question of ownership and operation of ground stations, whether by government agencies or corporations, private carriers, or entities having mixed public-private ownership, is a matter to be settled by the appropriate authorities of the country concerned under the applic able domestic law. The Corporation has not attempted to influence decisions in such matters.

"The Corporation's interest, of course, is in expediting the construction and operation of ground stations in countries which potentially will make significant use of the space segment of the global system. Discussions toward this end have been held with responsible officials in a great many countries. In the absence of a decision in a particular country authorizing a private carrier or combination of carriers to own and operate a ground station, such discussions necessarily have been conducted with the public entity representing that country in INTELSAT. This applies specifically to the three South American countries participating in INTELSAT in which American carriers operate: Argentina, Brazil, and Chile. In none of these countries has a decision been made to authorize private carriers to own or to participate in the ownership of a satellite ground station, although various proposals for such ownership have been under consideration for some time.

"It is to be noted that, in addition to U.S. carriers, certain carriers of other countries are operating in South America. Such carriers also have an interest in the resolution of questions concerning the identity and composition of any nongovernmental entity which may be authorized to own and operate a ground station. In the light of the Corporation's role as manager on behalf of all of the participants in INTELSAT, it would not be appropriate for the Corporation to attempt to influence the decision of the governments concerned so as to favor the interests solely of U.S. carriers. In fact, the Corporation has assured representatives of non-U.S. carriers operating in South America that it will maintain an attitude of strict impartiality in discussions with foreign governments which might touch upon competing interests of private carriers operating in that area."

SUPPLEMENT 1 TO ATTACHMENT B

FEBRUARY 16, 1966.

MEMORANDUM FOR DIRECTORS

Comsat management was informed yesterday, Tuesday, that an (unnamed) U.S. company had entered a protest to the State Department concerning Mr. Johnson's activities in Southeast Asia, alleging that he was acting in violation of U.S. policy for the support of U.S. commercial interests operating in foreign countries. I quickly sought and was granted a conference with the appropriate group in the State Department this morning, Wednesday. At this conference. Department officials confirmed that such charges had been made and read to me excerpts both from the Department's inquiry sent to Manila and Bangkok and the replies from those two ambassadors. The replies strongly refuted the charges. and I was informed that the State Department considers the matter at an end. I do not know and have not sought to learn the source of the charges. If. however, the charges were made by a U.S. communications carrier, as is certainly possible, the following is pertinent as background:

(a) A copy of Comsat's "Corporate Policy on International Contracts." 20 January 1966, which was distributed to all Directors at the January Board meeting, was forwarded under a personal letter by me to the heads of all U.S. International carriers.

(b) Before leaving for the Far East, Mr. Johnson spoke individually to responsible representatives of those carriers, informing them of the purpose of

his trip and of the position he intended to take in conversations in all countries visited.

(c) On 11 February I wrote to the heads of the same carriers, inviting them to be represented at a meeting during the first week in March, at which Comsat will present "the substance of recent discussions our representatives have had with a number of communications officials in the Far East and in Latin America."

Against this background, you will understand why I have taken a very serious view of this mysterious charge against Comsat, and why I wanted all of the Directors to know of it. That it reflects on the effectiveness of my stewardship bothers me not at all. That it reflects on the integrity of such an honorable and dedicated person as Mr. Johnson troubles me very much indeed. Most of all, however, I am disturbed at the method used in trying to discredit Comsat, for if it is used on this point with the State Department one must assume that it may be used on this and other points in government and outside.

JAMES MCCORMACK.

SUPPLEMENT 2 TO ATTACHMENT B

CORPORATE POLICY ON INTERNATIONAL CONTACTS

In carrying out the Corporation's responsibility to provide the U.S. participation in a global communications satellite system and in order to further the provision by Comsat of satellite communications service, Comsat representatives are in regular contact with many present and potential international participants. These contacts are at various political, professional and commercial levels, and occur both at home and abroad. Necessary coordination is effected with the Department of State and its representatives abroad.

The objective of such contacts is to supply technical and other informational background to advance international understanding of the capabilities and advantages of an effective satellite system, and to assist, where appropriate, in the implementation of plans for active participation in and increased utilization of the system.

As regards ownership or operation of associated electronic ground environments outside of the United States, Comsat representatives are especially careful not to infringe in any way on the proper interests of any other communications organization-foreign or domestic, national or commercial-insofar as these are known to Comsat. In furthering this purpose, Comsat welcomes the maximum reciprocal exchange of pertinent information with other affected communications organizations and equipment suppliers as a matter of mutual interest and benefit. In all international contacts, considering the Corporation's national and international responsibilities, it is clear that Comsat can neither serve as an agent of any other U.S. commercial organizations nor delegate its own responsibility to any such other organization as Comsat's agent.

Comsat's goal is at all times, as directed by law: to establish at the earliest practicable date global communications satellite coverage to serve the needs of the United States and other countries.