THE BIG SPACE GIVEAWAY

...Washington was shocked, then, to learn that the Kerr Committee was reporting out a bill which was satisfactory to both Senator Kerr, who had repeatedly attacked the supporters of the Administration's bill, and to the Administration, which had—on paper—passionately defended the public interest against the forces of monopoly...

...Vet such a compromise has indeed been achieved...

...This would be intolerable from the standpoint of the public interest...

...We can always give the satellite away...

...The fact that this financial dominance guarantees actual dominance of the corporation has been widely acknowledged, even by the Justice Department in its testimony in opposition to the Kerr bill...

...The FCC orders appear for all purposes," they said, "to determine that the satellite communications system is to be owned and operated by this group of ten 'international carriers.' This would mean that only four concerns would participate in the system's ownership since the other six companies in this group have professed no interest whatsoever in space communications...

...an increase in that industrial concentration which has already been described by experts as one of the prime causes of America's "second-best" status in space...

...Both forms would permit the kind of cooperation with foreign governments and the United Nations which would be dictated by our nation's foreign policy and not A T & T's corporate interests...

...Curiously, in the President's discussions of the bill he has acknowledged that the $1,000 share price was specifically intended to exclude the general public...

...ultimately the United Nations and the entire world will be involved...

...The essential fact is that no system of private ownership can be acceptable because all such systems are opposed to the public interest...

...Under the leadership of Representatives Emanuel Celler and William Fitts Ryan of New York, and Senators Hubert Humphrey of Minnesota, Estes Kefauver of Tennessee, and Wayne Morse of Oregon, a group of thirty-five Democratic legislators as long ago as last August wrote the President spelling out the dangers they foresaw in the intended plans of the Federal Communications Commission...

...There are other defects in the bill...

...This support severely handicaps the drive by liberal forces to establish the space communications system as a public asset under public control—where it belongs...

...Both forms would establish a public corporation to own and control the satellite and ground stations, use of which would be determined on a rental basis...

...Finally, the equity contributions to the new corporation would be made part of the rate base of the contributing companies so that the investment would be charged off against other services provided by the owners...

...Long before even the Kerr bill was introduced, a number of liberal members of Congress had become concerned about the problems of giveaway and monopoly control in the space communications field...

...The highly controversial question of the ownership of ground stations has been resolved in favor of the carriers, who thereby obtain a position in which message content, rates, and even actual use of the satellite will be under the direct control of the carriers much as the rates, content, and usage of present day cables are controlled by A T & T. Finally, twenty per cent of the voting stock available to the public—the same percentage of the total as under the initial Administration bill—is reserved for purchase by all foreign interests, public or private, which may wish to participate in the system...

...Within several weeks after the end of these hearings, Senator Magnuson is expected to finish consideration of the private ownership bill...

...In his role of chairman of the Senate Committee on Aeronautical and Space Sciences, the millionaire Oklahoman seemed to be acting quite in character when he secured Committee approval of a compromise bill which would, in effect, present the whole program to the communications industry as a guaranteed profit-making gift...

...Cloaked in mystery (anyone whose absolute devotion to the Administration was not a matter of record was refused permission to see the draft), the bill was the subject of speculation on Capitol Hill for weeks before its contents were revealed...

...Any single company would have been able to own a maximum of fifteen per cent of the authorized or twenty-five per cent of the outstanding Class A shares, and ownership in Class B stock, which presumably counted as a part of the investing company's rate base, would have been convertible to Class A shares...

...A space communications system, as Attorney General Robert F. Kennedy told a House committee, has been "made possible only because we have invested large sums of taxpayers' money...

...The importance of this point would be difficult to exaggerate...

...From a technical point of view, the problems involved in building such a system are not overwhelming...

...Once given away, however, we can never get it back...

...When these steps have been taken, the issues will be clearly before Congress and the nation, however garishly illumined by rhetoric and publicists...

...Wayne Morse, Oregon', Maurine Neuburger, Oregon, and Ralph Yarborough, Texas, all Democrats, and introduced in the House by Representative Frank Ko-walski, Connecticut Democrat...

...It should be clearly understood that the new bill does not answer any of the major objections which made past approaches unacceptable...

...If either proposal were accepted, the general public would gain...

...and finally, only public ownership can guarantee that the management of this international communications system will not only be concerned with foreign policy considerations but will use the system as a dynamic instrument in the implementation of that policy...

...The rocketry hurdles are largely surmounted, and an apparently feasible plan for the communications aspects has been sketched by government and private experts who have worked toMICHAEL PADNOS is the legislative representative for Americans for Democratic Action, for which he recently concluded a special study of the communications satellite program...

...THE BIG SPACE GIVEAWAY by MICHAEL PADNOS One of the first and most exciting benefits of the nation's satellite program is the promise it holds for improving communications throughout the entire world...

...They were first raised publicly in a report made to the Federal Communications Commission by an ad hoc committee of members of the communications carrier industry—telephone, telegraph, and other companies in the business of sending and receiving communications electronically...

...Briefly, the industry committee's report recommended that the operation and management of a space communications system be turned over to a "non-profit corporation" owned by those international communications carriers willing to put up at least $500,000 in equity...

...This giant step forward in communications, with all its ramifications in international relations, is possible because of the Federal government's multi-billion dollar satellite program...

...The Secretary of State can only "advise the corporation of relevant foreign policy considerations," a dangerous abdication of national sovereignty to private interests, and a large step backward from the first Administration bill, which would have provided that sueh negotiations be "conducted or supervised" by the State Department...

...The inevitability of this result is in itself proof of the fact that private ownership in this field means monopoly ownership and would be totally inconsistent with our professed principles of free, competitive enterprise...

...More important, it would mean that one of these four companies, A T & T, would have a dominant and, very probably, a monoply position in ownership of the space communications system...

...Why give it away now...

...if A T ,1 T contributes in the same proportion as it offered to contribute under the original proposal it will own -12.5 per cent of the stock available to the carriers...

...On March 28, the Ken-Committee reported out a bill which incorporates in a new, slightly purified form all the thinking of the original report of the communications industry committee...

...There seem to be signs of some cooperation with the Russians...

...The political questions, however, are more difficult to answer...

...No one seriously questions the need to build a communications satellite system...

...Furthermore, no one but AT&T (and perhaps a few other large carriers and equipment manufacturers) will have any interest in providing funds for the venture...

...They all result in public payment for private control...

...Liberal argument has stressed three points: Turning over the government-developed space communications system to any private corporation would represent an unprecedented giveaway...

...Recent events," Senator Kefauver has pointed out, "have shown that space communications problems are intimately related to our foreign policy...

...The corporation would have a board of directors composed of not more than two representatives from each company and three representatives from the public, the latter to be appointed by the President...

...One issue seems clear...

...radio will reach clearly and static-free halfway around the globe...

...The system will depend on a number of satellites endlessly orbiting the globe at a height of several hundred or several thousand miles, receiving radiomagnetic messages of all kinds, and relaying them directly to any point on earth...

...In effect, AT&T would be the chosen instrument of the U. S. government to own and control civilian space communications...

...gether on the problem under Federal programs...

...This indictment could be expanded indefinitely...

...furthermore, it includes many of the modifications suggested in the recently-introduced Celler proposal, a combination public-private ownership bill...

...We do not yet know either the technical or economic potential of such a system...

...No one who knows the record of Oklahoma's conservative Democratic Senator Robert S. Kerr was particularly surprised that he favored handing over this marvelous international communications development to private industry...

...six by the public owners, and three would be appointed by the President, with the advice and consent of the Senate...

...Unlike the first Administration bill, no limit is placed on the amount of stock which could be owned by any one carrier...

...The scientists describe the system as one in which two or three active satellites (i.e., containing equipment for receiving and transmitting, instead of merely passively reflecting, messages from earth) would orbit around the earth at the equator high enough so that at least one would always be in line of sight from every point on the entire globe, thus permitting the straight-line sending and receiving which is required for transmission of radio waves...

...Meanwhile, the Administration was working on its own bill...

...Not only would it be reassuring to beat the Soviet Union in an exciting and peaceable contest, but a satellite system would more effectively and efficiently replace costly earthbound communications facilities and provide an economical means of opening up the large number of television, telephone, and data-processing channels essential to meet the vast expansion in international communications expected during the next few years...

...The necessary research and development, which is almost completely taxpayer-financed, is proceeding without delay—so there is no need to settle the organizational question immediately...

...Senator Kerr, powerful in this field as chairman of the Senate Committee on Aeronautical and Space Sciences, blessed the bill with his backing and the Committee recently completed hearings on the proposal...

...Indeed, at first glance the Administration's bill seemed a more public-spirited approach to the problem...

...The thrust of liberal effort on Capitol Hill consequently ftas been directed towards an undiluted program of public ownership...

...Senator Kefauver's Subcommittee on Monopoly and Anti-trust has been holding hearings on the anti-competitive aspects of the private bills...

...Like the other bills designed to place the satellite system in private hands, the opportunities lot foreign participation which the President so earnestly requested in his policy statements have become all but non-existent...

...This exclusion of our allies from more effective participation in a system of international communications is among the most gravely disturbing provisions in the bill...

...no private monopoly can...

...The legislation which has so far been introduced to accomplish this purpose takes two forms: a bill by Representative Ryan, and the Kefauver bill, which has been co-sponsored by Senators Quentin N. Burdick, North Dakotai...

...But because the Class A stock would be issued only at the discretion of the corporation and would be unattractive to the public because of the high unit price (plus the more important fact that it would pay no dividends for many years), the most probable result of this proposal would be that at least a controlling share of the stock would have been purchased by A T & T and two or three other corporations it controls or dominates...

...There is also general agreement that this approach is preferable, in terms of both the long-run economy and the potentially greater number of channels, to the alternative course advocated by American Telephone and Telegraph, which would require launching a large number (estimates vary from thirty to 400) of small satellites to circle the earth at a low (100-3,000 miles) altitude in random orbits...

...Present commitments of any kind as to the control of the system may hinder its rapid development and prejudge vital questions of public interest and international relations...

...Under an unusual procedure agreed upon by Senator Kerr and Senator Warren G. Magnuson, Washington Democrat, the bill which has been reported out will be sent first to Magnuson's Interstate and Foreign Commerce Committee before it goes to the floor of the Senate...

...Not all of Congress had been passively waiting witli rubber stamp in hand for the arrival of the Administration's bill...

...it should be noted that the government has already spent $471 million on this program and a total of more than $25 billioti on other relevant research and development...

...This grudging provision was apparently included because of the President's invitation last July 24 to "all nations to participate in a communications satellite system, in the interest of world peace and closer brotherhood among peoples throughout the world...

...Furthermore, AT&T could also be expected to dominate the Class B shares, because it is the only company with both the desire and sufficient resources—assets larger than General Motors, Standard Oil of New jersey, and Ford Motor Company combined—to make the required large investment...

...Until recently, the force of these arguments had been directed against a divided opposition, lor the advocates ol private ownership had given every impression ol being sharply divided between the Administration and the Kerr approaches...

...in its place there is only one class of voting stock, shares of which will sell for $100 and be sold in two equal blocks: half to the carriers and half to the general public...

...In brief: Ten big international communications carriers proposed that they own, operate, and allocate channels used by the communications satellites, in return for which they agreed to contribute part of the cost of mounting the system...

...Although it might be considered sufficient for liberal lawmakers to work merely to prevent an out-and-out giveaway of the system to private interests, they felt obligated, because of the zeal with which private ownership bills were being pushed, to pie-sent their own alternatives...

...In the opinion of many observers, public ownership is the only satisfactory way to resolve these difficulties...

...Indeed, A T & T could own the entire fifty per cent of carrier stock, and the fifty per cent available to the public could be divided among as lew as live firms, possibly five equipment manufacturers, and through these six concerns the communications industry could control nine of the fifteen directors...

...Indeed, an American satellite owned and operated by an American monopoly—especially one dominated by American Telephone and Telegraph Company, the greatest monopoly of all—can offer valuable propaganda ammunition to our cold war adversaries...

...II A T & T left one share of carrier stock available to another carrier—General Telephone and Telegraph, lor instance—the seven firms would elect twelve of the fifteen directors...

...But there was stunned surprise when the Kennedy Administration not only gave the bill openly warm support but earlier had designed and presented its own rival proposal that would have achieved practically the same end by somewhat less direct means...

...Albert Gore, Tennessee...

...And like the other bills, it gives tacit approval to a joint venture of communications carriers which is indistinguishable from the merger plans which Congress has rejected for the last ten years...

...Ernest Gruening, Alaska...

...If these considerations are not compelling, it should be further noted that the corporation created by the new bill, like those proposed in former legislation, will be funded principally by A T & T—mainly because no other company in the United States has sufficient assets to invest the enormous sums of money which AT&T can easily afford to put into the system...

...In addition to the voting stock, the corporation would be authorized to issue non-voting securities, debentures, bonds, or other certificates of indebtedness which a communications carrier may purchase and include in the company's rate base for international services- This investment may not be included in the domestic rate base, as would have been possible under earlier proposals...

...every private scheme which has been proposed would lead to domination by A T & T, an industrial monopoly already all but unregulable by the government...

...The Administration's proposal for Class A and Class B stock has been eliminated...

...Ever since the Administration's bill was first introduced into Congress, many observers have been confounded at the thought of a privately-owned satellite winging its way through space and at the appalling notion of extending into the realm of the stars the stranglehold on electronic communications now enjoyed by the giant American Telephone and Telegraph Company, the largest privately owned industrial corporation in the world...

...In contrast, the opposite is true of the proposals which have received the support of the Administration...

...The satellites would, ideally, be synchronized with the speed of the earth's rotation, to make them stationary in relation to the ground...

...If a carrier should wish to exceed its pro rata quota of channels, it would be assessed a rental fee which would then be redivided among the other carriers...

...a 10,000 mile telephone call will come through as distinctly as if it were from next door...

...Each carrier would be permitted to own its own ground stations and a certain number of communications channels, the channels to be allocated without charge to the investors in ratio to the equity contributed to the corporation...

...Quoting the President himself, thev noted that " 'To date no arrangements between the government and private industry contain any commitments as to an operational system.' We believe this is as it should be...

...What has not been mentioned is that the argument is as valid in relation to the Administration bills as it was in connection with the Kerr bill...

...Moreover, the measure, unlike the Celler bill, does not permit the President to veto corporation decisions which he regards as unwise...

...such a system is not favored because it would require costly ground stations to search the skies for the randomly flying satellites and many expensive launchings to mount the large number of artificial bodies...

...That measure proposed to establish a private corporation with two classes of stock: a dividend-bearing voting stock, Class A, which was to be available to the general public (or at least those members of the public who could afford the stock at $1,000 a share), and Class B stock which could be purchased only by the communications carriers...

...It appeared finally on February 7, 1962, accompanied, as expected, by a clarion call to action from the President...

...It is no coincidence that in the original industry proposal AT&T offered to put up $65 million, thirteen times more than that offered by any other company...

...The merger issue, the significance of A T & T's vertical integration, and the manner in which A T & T is able to dominate other communications carriers while not owning them outright, should finally become a part of the public record...

...Yet the Administration is supporting a measure that would enable the stockholders of a private corporation to reap the rewards of an investment of billions of dollars of the people's money in the most dramatic development in communications in the last fifty years...

...Their total promised contribution was and is $78 million...

...in either case A T & T's ability to withhold or provide financing is the means by which it will be able to assure that the corporation will act in compliance with its particular interests...

...The bill which was reported out, it is sale to say, will be completely satisfactory to A T & T. Under the provisions of the new bill, a private corporation would be established, to be governed by a lif-teen-member board of directors...

...Proponents of public ownership maintain that these facts make it clear that the President's plan would lead to precisely the same result as would have been achieved under the Kerr proposal, with one notable difference: The outright giveaway proposed by Senator Kerr would be replaced in the Administration's bill by a bothersome, time-consuming, smoke-screen financial operation...

...and the abandonment to private interests of a technical marvel with incalculable potential for promoting the foreign policy of the United States...

...Like every other bill providing for private ownership, it will allow the carriers to own the ground stations, elect at least half the directors, and be regulated principally by the FCC, an agency which since its inception in 1934 has failed to control the monopolistic practices of the communications industry...

...Six directors would be selected by the common carriers...

...His message called for the "dramatic demonstration of our leadership in this area of space activity" which would be made through the enactment of his bill, and declared, rather self-righteously, as it turned out, that the Administration could not, "in good conscience," accept the Kerr proposal to limit ownership "to a few existing companies and exclude automatically all other potential investors who have equal rights to own a part of this Federally-developed enterprise...

...Only the United States government," the Senator warned, "can adequately represent the national interest in the necessary negotiations...

...Although these specific recommendations by the industry committee have never been placed before Congress, a bill which contains the essence of the report—but without the public directors, without the limitation on directors from any one corporation, and stripped of some other committee recommendations designed to cover up the embarrassing proposed giveaway—was introduced into both houses of Congress soon after the report first made its appearance...

...The lawmakers further pointed out there was absolutely no need for a decision on ownership to be made before the system had become functional...

...The legislators minced no words...

...both forms would utilize tax monies for the benefit of all the taxpayers and not a select group of stockholders...

...asked Senator Kefauver recently...

...In a few short years, world-wide television of excellent quality will be a reality...